ISLAMABAD: Smuggling of the dollar, increase in trade deficit, non-materialization of funds from friendly countries as well as absence of investment have contributed to the ongoing pressure on the rupee.
This was stated by former Finance Minister Dr Hafeez Pasha while talking to Business Recorder on telephone.
“There has been no significant increase in foreign exchange reserves despite disbursement of $1.16 billion by the International Monetary Fund (IMF), which implies that the country has not yet received expected funds from friendly countries,” Dr Pasha pointed out, adding that the smuggling of the dollar and increase in trade deficit have exacerbated the problem.
Sadly, there is no good news for the economy as the market is down and investment has dried up in the country. He lamented that the government decision to lift the ban on luxury items subsequent to foreign pressure; and further the imposition of regulatory duty to control imports has not worked.
Pasha suggested that instead of imposing regulatory duty, import tariff is increased across the board by 30-40 percent on all items except medicines, books and essential items. Rationalization of tariff policy will only help deal with imports and increase revenue by Rs 400-500 billion revenue.
He explained that the average Most Favoured Nation (MFN) tariff in Pakistan is 11 percent compared to 14 percent in Bangladesh and 18 percent in India despite the fact that these countries’ have considerably more foreign exchange reserves than Pakistan.
The former finance minister observed that Pakistan has been unable to regulate its’ imports through tariffs whereas India and Bangladesh have done this successfully.
Former Adviser Finance Ministry, Dr Ashfaque Hasan Khan, however, stated that political instability is the root-cause of the problem as no one is certain what will happen from one day to the next and the government’s entire focus is on political issues instead of economic matters. “Everything seems in a freefall,” he added.
Copyright Business Recorder, 2022