KARACHI, April 15: Pakistan’s budget, foreign exchange reserves, exchange value of rupee and market prices are bound to come under serious strain in coming days because of government’s failure to deal effectively with speculators, hoarders, profiteers and cartels.

At the end this fiscal year, Pakistan’s trade imbalance is expected to touch $10 billion plus, current account deficit may go beyond $6 billion straining the much-touted foreign exchange reserves of $12 billion and budgetary gap may be close to five per cent. Consumers will be the only victims as powerful sections of society — bureaucrats, traders, big business and the corporate sector — are the main beneficiaries of the system.

The duty-free import is found to be the only recipe to deal with the shortages and price escalation of commodities and essential items. On Friday the government decided to allow duty-free import of cement as domestic prices climbed to Rs400 plus a bag.

Not only that cement will be imported duty free, the government is offering a freight subsidy of Rs60 on a 50kg bag (Rs1.50 per kg) and a 30 per cent reduction in railway fares.

Earlier, the government had decided to allow duty-free import of fertiliser for the Kharif crop.

These decisions have been taken amidst reports that international oil prices have surged to new heights beyond $70 a barrel. Pakistan’s import bill, according to official figures, stood at an all-time high of $20.69 billion during July-March of the fiscal year 2005-06.

The mounting import bill has stretched trade imbalance in the last nine months to $8.68 billion. With a rising trend in international oil prices, the government decision to allow duty-free import of cement and fertiliser after opening market avenues for duty-free import of wheat, sugar, pulses and vegetables, Pakistan’s total import bill at the end of the current fiscal year is expected to be close to $28 billion.

There is no respite in import of cars and automobiles. A variety of consumer items are also imported as Danish cheese, butter and honey are popular with the neo rich class in Pakistan.

Duty-free imports of wheat, sugar, pulses and other items have not brought any price relief to the consumers. Distress imports have served a few trade houses that have close links with international traders with whom cargo-loaded ships can be diverted mid way to Pakistan at the sellers’ price.

All these duty-free imported Profiteers, hoarders, cartels go unchecked items are being offered subsidy in one form or the other to the benefit of traders, millers and middlemen. This is bound to increase current revenue expenditure of the budget and eventually the budget gap.

The government borrowing for budgetary gap has already exceeded the target. The private sector too has borrowed beyond the projections of annual credit plan. The build-up of liquidity has given an opportunity to the cartels and speculators to hoard commodities and control supplies.

Rumours moving around the market indicate a possible review of discount rates of the banks to put a gear on money supply. But a reversal of the monetary policy is bound to invite flak from the industry which is already hard pressed.

The year 2007 or 2008 is expected to be an election year. Market analysts say the government will find it difficult to take a harsh decision or take a U-turn on its economic policies. It will continue to pamper the market manipulators in its budgets.

Neither the political parties nor the civil society could take a tough stance on the market related issues in the last six years because of inherent weaknesses. The government is convinced that the consumers in Pakistan have the capacity to pay much more than what they are paying now.