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Sunday, April 14, 2024

Govt lifts import ban on luxury items after saving $275.5 million

Due to the import ban on luxury items, Pakistan's import bill was reduced by over 69% from $399.4 million to $123.9 million between May 20 and July 19.

The government lifted the import ban on luxury and non-essential items after two months. The decision was taken during an Economic Coordination Committee’s (ECC) meeting, chaired by Finance Minister Miftah Ismail.

The ECC lifted the ban on imported goods except for completed built units (CBUs) of automobiles, mobile phones, and home appliances. Interestingly, due to the import ban on luxury items, Pakistan’s import bill was reduced by over 69% from $399.4 million to $123.9 million between May 20 and July 19.

According to the details, the major contributors to this reduction of about $275m were automobile and mobile phone CBUs, which had a share of 79pc in the total import reduction. The remaining 21pc reduction was spread over 810 tariff lines impacting multiple sectors of the economy, including foreign investments.

Read more: Tackling the issue of rising import bills in Pakistan

Furthermore, it was decided that all held-up consignments (except items that still remain in the banned category) which arrived at the ports after July 1, 2022, may be cleared subject to payment of a 25% surcharge.

Wise decision?

Back in May, the government – in what seemed to be a panic mode – decided to impose a ban on the import of around 33 classes/categories of goods to avoid a default with the International Monetary Fund (IMF).

Major trading partners raised alarm at the ban because it hit the imports of cars, mobile phones, cosmetics, cigarettes, food products, certain garments, and toiletries. The ban severely impacted supply chains and the domestic retail industry.

Read more: Maryam Nawaz directs Mitfah to unban pet food after Gharidah Farooqi’s request

Important to note that these “luxury items” make up less than 5% of projected imports. They hit the import bill by hardly $600 million. Economic experts are of the view that the country needs to increase its exports to stabilize the economy.

Moreover, instead of saving foreign exchange, the decision incurred heavy losses. To clarify, a large number of containers accumulated at terminals, leading to port congestion and the revenue loss of billions on account of duties and taxes. Heavy container demurrage charges were also being incurred, which had to be paid in foreign exchange.