In a latest development, the State Bank of Pakistan (SBP) has imposed 100% cash margin on the import of a wide array of consumer products. The notion of taking this step is to narrow the disturbingly high trade deficit which is consuming foreign exchange reserves rapidly.
The State Bank of Pakistan in a statement said:
“This regulatory measure would discourage the import of these items and would have nominal impact on the general public”
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Following are the items on which SBP has levied 100% cash margin:
- Arms and ammunitions
- Electrical appliances
- Home appliances
- Mobile devices
- Motor vehicles – both fully knocked out and wholly built ones
- Personal care
Imports in 2 Fiscal Years
The imports of motor vehicles and their spare parts grew to $1.263 billion in 2015-16. During the first seven months of 2016-17, the overall import of motor vehicles rose more than 40% to $1.018 billion.
As far as the import of mobile phones is concerned, it has already crossed $0.5 billion mark. It is relevant to mention that Pakistan imported mobile phones worth $667 million in 2015-16. Moreover, they are exhibiting a mounting tendency this year too. The imports of the mobile phones have reached $334 million in the first seven months of the current fiscal year.
It is also noteworthy that the imports of electrical devices and machinery have also augmented drastically. As a result, it is making things extremely difficult for the government to uphold the high level of foreign exchanges reserves. The bankers are of the view that the pressure is on the rise since foreign exchanges reserves have declined abruptly during the last four months.
Imports of electrical devices grew to $1.25 billion in 2015-16. The latest trend indicates that the numbers will further increase. The imports of electrical machinery amounted to $691 million during the first seven months of the fiscal year.
Rapid Drop in Foreign Exchange Reserves
Pakistan’s foreign exchange reserves have been deteriorating since October 2016. The reserves have fallen to $21.9 billion by the middle of this month from $24 billion in October 2016.
In a statement, the central bank commented:
“The State Bank of Pakistan expects that this regulatory measure would help accommodate incremental import of growth-inducing capital goods”
The industry pundits believe that SBP should take necessary measures to discourage the imports, especially that of the food items, which reached a whopping $4.6 billion in 2015-16.