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Tuesday, July 16, 2024

Heavy financial losses as import ban causes congestion at ports

It seems that instead of saving the foreign exchange, the government's decision to ban the import of luxury items is incurring heavy losses instead.

The incumbent government’s import ban on luxury items is leading to heavy financial losses for traders. Around 600 to 900 containers are stuck at Karachi ports due to delays in vessels sailing from origin and Bill of Lading issued after May 19, 2022, the media reported.

The federal government has imposed a ban on the import of luxury items vide SR0.598 (i)/2022 dated 19th May 2022. To clarify, the government imposed a ban on the import of around 41 items for two months to avoid a default with the International Monetary Fund (IMF).

The decision hit the imports of cars, mobile phones, cosmetics, cigarettes, food products, certain garments, and toiletries. According to the government, the ban on the import of luxury items will save Pakistan’s foreign exchange.

Read more: Customs seize personal belongings of passengers under ‘luxury items’ ban

“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 as the decision was met with a lot of backlash and criticism from the public.

Financial losses

Important to note that these “luxury items” are 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, it seems that instead of saving the foreign exchange, the decision is incurring heavy losses instead.

Arshad Khursheed, general secretary, Karachi Custom Agents Association (KCAA) told the media that around 600 to 900 containers arrived in Karachi but they were unable to get clearance from customs due to the said SRO.

To clarify, the existing law only permitted import consignments in which the date of the bill of lading was prior to the amending order of the import policy 2022.

Read more: How politics has crippled Pakistan’s economy?

As a result, a large number of containers have accumulated at terminals, leading to port congestion and the revenue loss of billions on account of duties and taxes. On the other hand, heavy container demurrage charges were also being incurred, which had to be paid in foreign exchange. Earlier, there were reports claiming that banks are turning away customers with import transactions due to a shortage of foreign exchange in the interbank.