Curtailing imports, raising exports: SBP urged to take immediate actions

Governor State Bank of Pakistan (SBP) must take appropriate actions on immediate basis to curtail imports through 30 percent across the board cash margin requirement, and increase in exports through adjusting pending refunds of exporters against their tax liabilities to facilitate them and like in Bangladesh transferring cash through commercial banks against export incentives announced in the export package by the PML-N government.
If the caretakers feel they do not have the mandate to take these actions then the SBP Governor must step in to minimize the challenges to the economy, so stated Dr Hafeez Pasha in Aaj television programme ''Paisa Bolta Hai'' with Anjum Ibrahim. Dr Pasha also urged the caretaker government to initiate Article IV consultations with the International Monetary Funds (IMF) which would identify the existing lacunas facing the economy and save time for the elected government in negotiating with the Fund as "it is almost a foregone conclusion that we would have to go on another Fund programme."
Hafeez Pasha stated that there has been a sharp increase in imports during May 2018 based on speculation that the Pakistan currency will further depreciate against the dollar in the coming months.
He pointed out that there was an increase of 40 percent in mobile phone imports and 60 percent in tea imports in May because importers reckon imports would become more expensive and difficult due to further depreciation of the rupee.
Pasha emphasized that exports are the life line of the country and suggested incentives announced for exporters under Prime Minister''s package be provided in cash through commercial banks as is being done in Bangladesh and exports refunds should be adjusted against the tax liabilities of exporters.
Pasha suggested increase in the interest rate to encourage dismally low saving rate and added that low interest rate has not worked during the last five years; he added that efforts should be made to reduce the investment saving gap.
This, he said could be done through the monetary policy coordination committee deciding to increase the policy rate. Pakistan, he stated has one of the lowest savings rate and the government needs to enhance interest rates to encourage savings.
Hafeez Pasha said the economic situation has gone from bad to worse and this was acknowledged by the caretaker finance minister during her only media briefing with fiscal deficit crossing 6.1 percent. Pasha said that if government borrowing is taken into account, the fiscal deficit for the current fiscal year will be over 7 percent of GDP or Rs 2300 billion - the highest during the past five years and greater than the deficit in 2013, the last fiscal year of PPP-led government.
Dr Pasha said Pakistan''s current account deficit was $16 billion July-May 2018 and is expected to rise to $18 billion by the end of June. Pakistan''s foreign exchange reserves have been declining with $1880 million decline in May 2018. There is a need to determine the reason for the $15 billion capital flight from the country as revealed by the SBP to the court. This capital flight and the tax amnesty scheme are not appropriate measures when the country is under the watch of FATF.