Caretaker Government Contemplating Regulatory Duties on 1,100 Items to Safeguard Forex Reserves
The caretaker government in Pakistan is taking proactive measures to protect the country’s foreign forex reserves. As part of this effort, they are considering the imposition of substantial regulatory duties on approximately 1,100 luxury and non-essential imported items. Additionally, there are discussions about revising gas and electricity rates for export-oriented sectors and reinstating certain trade policies to meet International Monetary Fund (IMF) conditions.
1. Protective Measures for Forex Reserves:
- The government aims to bolster foreign exchange reserves by imposing regulatory duties on a wide range of luxury and non-essential imports.
2. Competitive Energy Rates:
- Efforts are underway to reintroduce regionally competitive gas and electricity rates for five export-oriented sectors, with possible revisions acceptable to the IMF.
3. Special Investment Facilitation Council (SIFC) Input:
- Suggestions regarding these economic measures have been reviewed in recent sessions of the Special Investment Facilitation Council.
4. Impact on Various Sectors:
- Around 1,100 items may face varying levels of regulatory oversight, including potential changes in import rules for three-year-old vehicles, both small and luxury.
- It’s important to note that some of these items are crucial intermediary raw materials for export sectors like textiles, chemicals, and footwear.
5. Cooking Oil Tariff:
- Cooking oil has among the commodities expected to be subject to regulatory duties, with the aim of reducing consumption and foreign exchange losses.
6. Ex-Pat Vehicle Import Limits:
- Small automobiles may permitted for expatriates remitting $50,000 annually to Pakistan, while luxury vehicle limits could exceed $5 million.
7. Petroleum Pricing Policy:
- The finance ministry is pursuing a petroleum pricing policy to recover the full imported cost, including exchange rate losses, with a potential increase in diesel levies in the coming months.
8. Trade Policy Revisions:
- Commerce Minister Ejaz has suggested the reinstatement of zero-rated status and regionally competitive tariffs previously withdrawn to meet IMF terms. This could partially restored based on increased energy consumption and higher exports.
9. Direct Electricity Purchase for Export Sectors:
- Export sectors, particularly textiles, may allowed to directly purchase electricity from local power plants, paying wheeling charges to distribution companies to ensure a steady supply and stable load.
These measures are part of a broader strategy to safeguard Pakistan’s forex reserves and promote economic stability during the caretaker government’s tenure.
