Amid depleting foreign reserves and a climbing trade deficit, the federal government has given a “positive nod” to approve a suggested two months ban on luxury items. However, the federal government remained silent on what could be considered a luxury item. The information was released on the condition of anonymity from a source within the Ministry of Trade. According to speculations, a ban will be imposed on perfumes and other fancy items, but no such ban will be imposed on the import of the luxury Toyota V8s.
Ban on luxury items!
The federal government gave a positive nod.
What are luxuries? A big question now? pic.twitter.com/ZImQTWPTzq— Economy of Pakistan (@Pakistanomy) May 10, 2022
The suggested ban comes amid fears of an imminent economic emergency. The country’s apex trade body on Saturday proposed financial reforms, reduction in subsidies, launching of an amnesty scheme, and called on the government to impose an economic emergency. According to the Federation of Pakistan Chamber of Commerce and Industry (FPCCI), “Subsidies on fuel and energy need to be withdrawn and contended that fuel and power subsidies must be rolled back on a priority basis as they are fiscally unsustainable,”. The chamber also asked to reduce the policy rate from 12.2 percent to 7 percent and urged the government to impose a ban on the import of luxury items.
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The suggestion came as the new government reflected a weakening will to take tough decisions on its own. Pakistan is currently faced with numerous economic challenges. The country’s trade deficit has crossed the $39 billion figure to mark the highest deficit in 10 months. Moreover, the country foreign exchange is also depleting as just weeks after the new government took power, the foreign exchange dropped by almost $4 billion. Pakistani rupee also slumped to an all-time low against the US dollar in the interbank market on Tuesday In addition, to make the matters worse, the country’s foreign inflows are also drying up.
Separately, the International Monetary Fund and the country’s allies have essentially refused to give financial grants to the country and set certain preconditions that the country has to undertake before expecting a loan payment. Analysts believe that to support the country’s economy and secure financial grants from international bodies, the government would have to take unpopular decisions and face public scrutiny.
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It is pertinent to mention that a meeting between Pakistan and the IMF is expected to take place in Doha, Qatar, and analysts suggest that the government would have to concede on not increasing the price of petroleum products to secure the Extended Fund Facility.