Less than three months ago, the coalition government announced a ban on the import of luxury items. The ban included an extensive list of commodities, including completely built-up (CBU) cars.
According to a recent media report, the government will remove the ban on luxury items, with the exception of cars and mobile phones.
The government has asserted that vehicle and mobile phone imports have had a significant impact on Pakistan’s soaring import costs. The officials explained that most of the unbanned items have little effect on the foreign exchange reserves.
Completely knocked down (CKD) kit import costs have surpassed $1.7 billion, setting a new record. The import bill has grown by 52% from $1.11 billion in Fiscal Year (FY) 2021. The growth occurred despite the State Bank of Pakistan’s restrictions on automobile financing and the inflation rate gradually rising.
While the auto sector’s expansion is encouraging, it raises worries about Pakistan’s current account deficit. Authorities say that the introduction of new cars from automakers with little localization of components is damaging Pakistan’s economy.
The car companies are awaiting the approval of the Letter of Credit (LC) by SBP to begin importing CKD kits for their cars without a hassle. However, the delay is in-built to restrict all auto sector imports due to their impact on the foreign exchange reserves.
