Concerned about the economic performance of the country, Finance Minister Miftah Ismail announced that the policy of limiting imports will be extended for the next three months. This is bound to reduce the import bill which is especially important considering that our exports have declined by as much as 24 percent. While it is normal for developing countries to function while supporting a current account deficit, having a deficit of over $18 billion is rather dangerous. In the face of this, tough decisions have to be made starting with restricting imports even with the risk of it slowing down economic growth. However, this policy alone is not likely to bring about the change that the authorities are hoping for.
The policy of restricting imports primarily applies to the automobile and electronic supplies industries as 95 percent of the cost of manufacturing is based on imports. Similarly, the government is seeking cheaper alternatives to Russia when it comes to wheat imports. Recently, the government rejected Russia’s offer of supplying 120,000 metric tons of wheat saying that the cost of $399.50 should be reduced further by 2.4 percent. Such policies will undoubtedly reduce the import bill but only marginally.
The fact of the matter remains that petroleum products account for a large chunk of Pakistan’s import bill. From 2020-2021, we spent $11.36 billion on oil–20.14 percent of the total import bill. This cost remains and without tackling this, restricting other imports will not produce the results desired. Clearly more thought needs to be given to such economic policies.
Currently, we are aiming to either restrict imports in industries that will produce little relief when it comes to the current account deficit or restrict the import of vital commodities like wheat without which many in the country will starve. Meanwhile, we will continue to spend exorbitant amounts on oil all the while our exports decline steadily because the import of basic machinery, equipment and materials for domestic production are being restricted. It is a counterproductive policy that must be fleshed out. The government must also understand that the first step is to become more energy sufficient—meaning our oil expenditure would reduce—and only then can we implement such selective import restrictions.
The policy of restricting imports primarily applies to the automobile and electronic supplies industries as 95 percent of the cost of manufacturing is based on imports. Similarly, the government is seeking cheaper alternatives to Russia when it comes to wheat imports. Recently, the government rejected Russia’s offer of supplying 120,000 metric tons of wheat saying that the cost of $399.50 should be reduced further by 2.4 percent. Such policies will undoubtedly reduce the import bill but only marginally.
The fact of the matter remains that petroleum products account for a large chunk of Pakistan’s import bill. From 2020-2021, we spent $11.36 billion on oil–20.14 percent of the total import bill. This cost remains and without tackling this, restricting other imports will not produce the results desired. Clearly more thought needs to be given to such economic policies.
Currently, we are aiming to either restrict imports in industries that will produce little relief when it comes to the current account deficit or restrict the import of vital commodities like wheat without which many in the country will starve. Meanwhile, we will continue to spend exorbitant amounts on oil all the while our exports decline steadily because the import of basic machinery, equipment and materials for domestic production are being restricted. It is a counterproductive policy that must be fleshed out. The government must also understand that the first step is to become more energy sufficient—meaning our oil expenditure would reduce—and only then can we implement such selective import restrictions.
