KARACHI: The State Bank of Pakistan (SBP) imposed on Friday 100 per cent cash margin on the import of a number of consumer items to bridge an alarmingly high trade deficit that is eating up foreign exchange reserves.

“This regulatory measure would discourage the import of these items and would have nominal impact on the general public,” said the SBP. The requirement of 100pc cash margin has been prescribed on items such as motor vehicles — both completely knocked down and completely built units — mobile phones, cigarettes, jewellery, cosmetics, personal care, electrical and home appliances, arms and ammunitions etc.

Imports of motor vehicles and their parts in 2015-16 rose to $1.263 billion. Their imports grew over 40pc to $1.018bn year-on-year in the first seven months of 2016-17.

Imports of mobile phones have crossed the half-billion-dollar mark. In 2015-16, Pakistan imported mobile phones amounting to $667 million. They are showing an upward trend this year as well, with imports reaching $334m in the first seven months of the current fiscal year.

Imports of electrical machinery and apparatus have also increased significantly, which is making it difficult for the government to maintain the high level of foreign exchange reserves. Bankers said the pressure is mounting since foreign exchange reserves sharply declined during the last four months.

Foreign exchange reserves of the country have been falling since October 2016. They fell to $21.9bn by the middle of this month from $24bn in October 2016.

Imports of electrical machinery rose to $1.25bn in 2015-16. The trend during the first seven months of the current fiscal year indicates its imports may go further up. Their imports amounted to $691m during the seven-month period.

“The SBP expects that this regulatory measure would help accommodate incremental import of growth-inducing capital goods,” the central bank said.

Experts believe the SBP should take more steps to discourage imports, especially those of food items that reached $4.6bn in 2015-16. In the first seven months of the current fiscal year, imports of food items rose to $3bn compared to $2.6bn a year ago.

Published in Dawn, February 25th, 2017