Ban on luxury items’ import to benefit country: PM

Move to help country contain import bill by hardly $600m of the total $6.6b

ISLAMABAD:

The federal cabinet on Thursday banned import of around 41 items for two months to forestall a looming default but the measure appears to be too little, as it would contain the import bill by hardly $600 million or less than 5% of projected imports.

The decision will hit the imports of cars, mobile phones, cosmetics, cigarettes, food products, certain garments and toiletries. The federal cabinet approved the summary to ban the imports through circulation after a series of meetings held at the Ministry of Finance and Prime Minister Office.

“My decision to ban import of luxury items will save the country precious foreign exchange. We will practice austerity and financially stronger people must lead in this effort so that the less privileged among us do not have to bear this burden inflicted on them by the [previous] PTI government,” PM Shehbaz Sharif tweeted. He further stated that together “we will overcome all the challenges with resolve and determination”.

My decision to ban import of luxury items will save the country precious foreign exchange. We will practice austerity & financially stronger people must lead in this effort so that the less privileged among us do not have to bear this burden inflicted on them by the PTI govt.

— Shehbaz Sharif (@CMShehbaz) May 19, 2022

Together we will overcome all the challenges with resolve and determination, InshaAllah! 🇵🇰 https://t.co/gIM7lqcjls

— Shehbaz Sharif (@CMShehbaz) May 19, 2022

It is the first major policy decision that the coalition government has taken, which will now pass through the scrutiny of the World Trade Organization (WTO) and the International Monetary Fund. The WTO encourages member countries to keep international trade open but allows temporary restrictions under certain circumstances including stalling a balance of payments crisis.

Import of the items have been prohibited to support the balance of payments position, according to the cabinet decision. It decided that the prohibition will not apply on the imports in rupees or through barter mechanism by land routes.

The prohibition on import of these items may be reviewed after two months, the federal cabinet decided.

However, the step, which is also the first serious move by the coalition government, appears to be too little. The prohibition of imports would curtail the monthly import bill by $280 million to $300 million, according to the Federal Board of Revenue official. This saving is hardly 5% of the monthly import bill of $6.6 billion.

For the current fiscal year, the previous Pakistan Tehreek-e-Insaf government had targeted to restrict the imports at $55 billion, which according to the Pakistan Bureau of Statistics have already shot up to $65.5 billion during the first 10 months.

The Ministry of Commerce has projected that the imports would now grow to $77 billion by the end of June. The projected $600 million saving would be around 5% of the annual bill.

Premier Shehbaz had initially directed to contain the imports by $2 billion per month. The Ministry of Commerce and the FBR had prepared a plan to cut the imports by $984 million a month through ban and an increase in regulatory duties. Finance Minister Miftah Ismail was against imposing restrictions on imports and desired that the regulatory duties be significantly increased.

But subsequently the prime minister turned down the proposal to slap regulatory duties and instead decided to completely ban the import of around 41 goods in addition to restricting the imports of components of cars (Completely Knocked Down or CKD cars) and semi-knocked down (SKD) mobile phones by half.

The decision to impose quota limits on CKD cars and SKD mobiles will be enforced through the Engineering Development Board and the State Bank of Pakistan, according to officials privy to the decisions.

Also read: Govt bans import of essential & luxury items

The federal government is empowered under the Imports and Exports (Control) Act 1950 to prohibit or restrict import and export of any good or class of goods, through an order published in the official gazette. Import of the proposed list of non-essential items can be prohibited by placing them in Appendix-A of the Import Policy Order (IPO), 2022.

The cabinet decided that the ban will take effect from the date of publication of the notification and the Ministry of Commerce issued the notification with immediate effect. However, as provided under proviso to Para-4 of the IPO 2022, the imports for which the bill of lading or irrevocable Letter of Credit was issued prior to the notification of an amending order shall be exempt from the ban.

The General Agreement on Trade and Tariff (GATT) 1994 provides a framework where members of the WTO can prohibit or restrict import of any product on the grounds of protection of human, animal and plant health and safety, protection of environment, moral, religious and security reasons and to forestall balance of payments crises, the cabinet was informed.

The Ministry of Finance has informed the IMF about the ban on the import.

During the week ended May 13, 2022, the State Bank’s forex reserves decreased by $145 million to $10.16 billion.

The items that have been approved to be banned included mobile phone in completely built unit (CBU) form while the kits of the phones coming into the country as SKD will be curtailed to half.

The cabinet also approved to completely ban the home appliance in CBU form, cosmetics, fruit and dry fruits, frockery, pet food (cat and dog food), private weapons and ammunition, shoes, chandeliers and lighting, headphones and loudspeakers, decoration pieces, sauces and ketchup.

The other items that have been banned include doors and window frames, travelling bags and suitcase, sanitary ware, fish and frozen fish, carpets but except those imported from Afghanistan, preserved fruits, tissue papers, furniture, shampoos, cars, confectionary, luxury mattresses and sleeping bags, jams and jelly, cornflakes, bathroom ware, toiletries, heaters, blowers, sunglasses, kitchen ware, aerated water, frozen meat, juices, pasta, ice cream, cigarettes, shaving goods, luxury leather apparel, musical instruments, saloon items and chocolates in retail packing.