Pakistan bans import of luxury cars, cosmetics, other items to mitigate financial crisis: Report

Pakistan government has decided to impose a ban on the import of non-essential and luxury items as the nation tried to avert a financial meltdown.

New Delhi: Pakistan government on Wednesday decided to impose a ban on the import of non-essential and luxury items as the cash-strapped nation tried to avert a financial meltdown amid depleting foreign reserves, according to a media report. Quoting sources, Geo News reported that Prime Minister Shehbaz Sharif has imposed a ban on the import of non-essential items that are not used by the common man. The decision is said to be important to control the dollar flight, it said.

The sources said that the prime minister has banned the import of luxury vehicles and other non-essential items, including cosmetics, for which instructions have also been issued.

They further added that the decision was taken due to the widening trade deficit and, after holding a consultative meeting with his coalition partners, Prime Minister Shehbaz decided that the government will take tough decisions to stabilise the ailing economy.

The US dollar has witnessed a record surge during the past few weeks and was being traded today at over Rs 200 in the open market, signalling a lack of confidence among the traders in the financial markets, the report said.

According to sources in the Federal Board of Revenue (FBR), a proposal to increase duty on some items has been submitted.

Under this, regulatory duty on machinery will be up by 10 per cent and home appliances by 50 per cent. Duty on cars above 1,000cc will be hiked by 100 per cent. Duty on mobile phones will also go up between Rs 6,000 to Rs 44,000 per unit, the report said.

The curbs on non-essential imports came as Pakistani officials and the representatives of the International Monetary Fund have commenced talks in Doha on Wednesday for revival of the stalled USD 6 billion Extended Fund Facility (EFF) programme.

Its revival has been termed crucial for Pakistan's cash-strapped economy, which has seen its foreign exchange reserves plummet in recent weeks amid import payments and debt servicing, the Business Recorder newspaper reported.

Foreign exchange reserves held by Pakistan's central bank decreased another USD 190 million to USD 10.31 billion last week, lowest since June 2020, with the level staying at less than 1.5 months of import cover, the report said.

With the dollar rising to uncharted heights, stakeholders warn that a weakening rupee could open up Pakistanis to a second round of inflationary impact, which will hit the lower and middle classes the hardest.

Experts told the Dawn newspaper that while no sector of the economy would be immune to the fallout from the rupee's steep devaluation, key areas such as debt servicing and imports for industry and food items will be among the first to be affected.

The rising oil prices have already doubled the oil import bills, but the overall imports are also at a record high. In April, imports increased by 72 per cent, leaving no room for the government to improve its external balance.