ISLAMABAD: The Pakistan Business Council (PBC) said that measures such as tariffs and LC margin calls would increase the cost of inputs and slow the economy.
The PBC made the observations in its analysis of import data released by the Pakistan Bureau of Statistics (PBS) for the period July-August 2021, which reported total imports of $ 12.17 billion – an increase of $ 5.17 billion or 74.09% compared to the same period in 2020.
While this increase is significant, it is important to break this number down to better understand the factors that have contributed to this increase in imports.
Based on import data reported by the PBS, PBC objectively analyzes the increase in Pakistan’s imports for the period July-August 2021 with comparable periods in 2020 (Peak-Covid) and 2019 (Pre-Covid).
Additional customs duty on automotive sector imports reduced to 2pc
Total imports, argues the PBC, have increased mainly due to rising world commodity prices. Much of it is due to escalating global demand and supply chain disruption as the world emerges from Covid.
The inflation of commodity costs, he further asserts, is not controllable, even if its payment is a problem. Escalating global demand and supply chain disruption caused by container shortages are primarily responsible for escalating costs.
Part of the increase in imports is due to food and agricultural shortages. Imports of these are inevitable for reasons of food security, controlling domestic inflation and securing inputs for textile exports. The revival of agricultural production is the lasting solution. The TERF-induced increase in machinery imports will pave the way for increased exports. The development of local energy sources is a long-term substitute for imports.
Importing buses and trucks is necessary to meet the needs of passengers and freight transportation.
Importing cars in CKD / SKD allows local capital gain. Instinctive and drastic measures such as tariffs and LC margin calls will increase the cost of inputs and slow the economy. According to PBC, increased tariffs on Food Group (palm oil, pulses, soybean oil and sugar) are also a factor in rising domestic prices. For example, despite a shortage of sugar in the domestic market, tariffs are high on the import of sugar.
The increase in palm oil and legume imports is mainly due to the increase in their international price.
The PBC further argues that tariffs and LC margin calls on Textile Group (raw cotton, man-made fibers and synthetic and artificial silk yarns) and medicinal products will fuel inflation.
Import surge: is smuggling reduction at stake?
Imports of raw cotton have increased mainly due to increased demand. The price of synthetic and artificial silk yarn has declined while demand has increased, resulting in increased imports of the commodity.
The PBC suggested that the government revise its pricing policy for petroleum products to encourage conservation; and recommended that the government avoid tariffs on machinery, cars and buses and that additional tariffs on iron and steel will increase the cost of construction inputs. In the case of iron and steel, the increase in volume outweighs the increase in prices, leading to an increase in imports. The increase in prices outweighs the increase / decrease in volume, leading to an increase in total imports.
While commenting on the less essential elements, PBC proposed that the import of cars in CBU form could be verified.
The prices of drugs have increased dramatically, which has increased their import value. Both demand and prices have increased for plastics.
Copyright Business Recorder, 2021