With Pakistan’s foreign exchange reserves in freefall, Minister of Information & Broadcasting Marriyum Aurangzeb on Thursday announced a ban on all ‘non-essential luxury goods,’ in a list that includes mobile phones, cars, fruit, shampoo, cornflakes, and chocolate.
Aurangzeb said, “All those non-essential luxury items that are not used by the wider public, a complete ban has been imposed on their import.”
Justifying the measure, Aurangzeb said they were essential to tackle the financial instability caused by the previous government led by Imran Khan, who was ousted in a no-confidence motion last month over inflation, unemployment, and mismanagement of the country’s economy.
During a press conference, Aurangzeb said, “This is an emergency situation and Pakistanis will have to make sacrifices under the economic plan.” She assured that the ban would have a “quick impact on foreign reserves” and save $6 billion.
Together we will overcome all the challenges with resolve and determination, InshaAllah! 🇵🇰 https://t.co/gIM7lqcjls
— Shehbaz Sharif (@CMShehbaz) May 19, 2022
Echoing Aurangzeb, Prime Minister (PM) Shehbaz Sharif on Twitter said the austerity measure aims to save “precious foreign exchange” in order to ensure that “the less privileged among us do not have to bear this burden inflicted on them by the PTI government.”
A list published by the government comprises: mobile phones, home appliances, fruits and dry fruits (except from Afghanistan), crocker, private weapons and ammunition, shoes, chandeliers and lighting (except energy savers), headphones and loudspeakers, sauces, doors and window frames, travelling bags and suitcases, sanitary ware, fish and frozen fish, carpets (except from Afghanistan), preserved fruits, tissue paper, furniture, shampoos, automobiles, confectionary, luxury mattresses and sleeping bags, jams and jellies, cornflakes, bathroomware and toiletries, heaters and blowers, sunglasses, kitchenware, aerated water, frozen meat, juices, pasta, ice cream, cigarettes, shaving goods, luxury leather apparel, music instruments, saloon items, and chocolates.
Essential imports such as fuel, edible oil, and pulses remain unaffected by the ban.
Alongside the wide-ranging ban, the government is also considering removing fuel subsidies.
Government has banned the import of following luxury items to save precious foreign exchange. pic.twitter.com/7JVMYQ0HNx
— Government of Pakistan (@GovtofPakistan) May 19, 2022
The announcement comes amid a dire economic situation, with the Pakistani rupee plummeting to an all-time low of 200 against the United States (US) dollar.
Pakistan’s foreign exchange reserves fell by just over $200 million to $16.1 billion in the first two weeks of May. The State Bank of Pakistan has admitted that it only has enough to afford one and a half months of imports, as its reserves have fallen to $10.1 billion. Additionally, the reserves of commercial banks fell to $5.9 billion.
Against this backdrop, experts have projected that Pakistan’s current account deficit could hit $17 billion, or around 4.5% of the GDP, this financial year. Furthermore, its trade deficit stands at $39.2 billion.
Interbank closing #ExchangeRate for todayhttps://t.co/1Ygp803qoD pic.twitter.com/ITPIZIgCO8
— SBP (@StateBank_Pak) May 19, 2022
Against this backdrop, PM Sharif on Monday chaired a meeting with the Exchange Companies Association of Pakistan (ECAP) to stop the rupee’s depreciation. Speaking at the meeting, ECAP chairman Malik Bostan said, “It is the open market or exchange companies that increase the dollar rates. In fact, the commercial banks have been increasing the rate.”
According to Dawn, officials also suggested closing down markets before sunset to save energy, reducing the import oil bill during the meeting.
Today, Pakistan’s rupee hits for the first time to the bottom of Rs200 per dollar.Nothing to celebrate. The last Rs100 was lost from December 2017 to May 2022. Of the last unwanted century, Rs64 was the score of PTI, Rs30 of PMLN and Rs6 of Dr Shamshad Akhtar.
— Shahbaz Rana (@81ShahbazRana) May 19, 2022zAnalysts have said that the current crisis is characterised by huge current account and trade deficits, decreasing foreign currency inflows, and rising foreign debt servicing obligations.
The government is holding discussions with the International Monetary Fund (IMF) for the next tranche of $1 billion in bailout funds and is also seeking aid from China and Pakistan. Sharif is believed to have requested around $8 billion during his recent trip to Saudi Arabia.