THIS refers to the news item ‘Islamabad needs to curtail imports, says Chinese envoy’ (March 30). What a pity that the Chinese are telling us to control unbridled imports to manage the economy? Pakistan’s adverse balance of payments is the mother of all the economic difficulties. We are exporting less and importing more; the exports being mere 40 per cent of the imports and the trade gap financed through borrowings.
Thus, the gross foreign exchange requirement this year is estimated at $30-35 billion from trade deficit and debt service obligations combined and could be higher next year. It calls for extraordinary measures to protect the external account from going under.
A sizeable chunk of the imports comprise luxury and avoidable consumer items for the well-to-do class, comprising less than 5pc of the population. It is the area where the dollar outflow can be easily compressed. The liberal, unrestrained and uncontrolled import policy must be revisited as well as the flawed Free Trade Agreements (FTAs) and Preferential Trade Agreements (PTAs) that have been signed with various countries.
It is benefitting the vested interests within the country as well as the foreign manufacturers while discouraging local entrepreneurship and innovation.
We must immediately ban the import of luxury and unnecessary consumer items to cut the import bill significantly and save dollars. Such a measure would not affect growth, employment or impact inflation. In fact, it will lessen the need to seek support for loans from, say, the International Monetary Fund (IMF). The resulting suppressed demand for dollars would have a salutary impact on the exchange rate that is now hovering over Rs180.
The economic policy thrust must be on import substitution as significant jump in exports is difficult to materialise in the short or medium term owing to capacity constraints in agriculture and manufacturing. Even the exports have high import content that complicate the balance of payments. From an import-based trading nation, we need to become a producing, manufacturing country. Nothing short of that will help resolve the issues that the country is facing for long.
Published in Dawn, April 14th, 2022