How the BAN on import of 38 luxury goods could support dwindling Pakistan’s Economy.

On 19th May 2022, the Information Minister of Pakistan Marriyum Aurangzeb announced the ban on imports of luxury goods in a new emergency economic plan to lift Pakistan’s economy. According to the minister, the ban will have an effect of $6 billion which is 1.2 trillion Pakistani rupees annually.

The ban has been imposed primarily to stabilize the economy which is under pressure as the country’s imports are less and exports are increasing. In addition to this, the Pakistani rupee is continuing its worst downfall in history crossing 200 rupees against a US dollar.

Let’s consider how this decision can positively affect the country’s economy.

Reduce Current Account Deficit.

Pakistan’s current account deficit in April 2022 was $623 million. Pakistan imports luxury products, such as motor vehicles, in huge quantities, the immediate effect of this decision would be a positive shift in the current account as a huge influx of non-essential goods from other countries could be eradicated.

Healthy sign for local market and producers.

This ban on imports will increase the demand for domestically produced goods in Pakistan. The fierce competition that foreign luxury products were giving to the local manufacturers is now restrained and it could be seen as a great opportunity for the local businesses to capture the market share and gain customer loyalty.

It might boost the GDP.

As the demand for local products will increase there will be a good prospect for the local producers to increase their production level to meet the higher demand. Therefore, the overall production level of the country might increase as the manufacturers will tend to increase their capacity of production to meet the demand.

Stabilize the Pakistani rupee against the US dollar.

The trades are done in US dollars and when Pakistan’s overall import bill will be reduced due to this ban, the supply of Pakistani rupee in the foreign exchange will also be reduced. There will be a decline in outflows from Pakistan which might help to stop the further deterioration of the currency.

Point of Concern.

These benefits are subject to a successful implementation of this policy. We cannot ignore that banning imports could give birth to black markets, if not implemented effectively. The announcement of the policy should be backed with concrete planning and its execution. The trading activities will have to be meticulously monitored to avoid any unauthorized trading.

Moreover, the local producers might not be ready to deal with an increase in demand due to the ban on imports. Considering the fact that demand increases quickly but supply takes time, the people of Pakistan might left with fewer choices and possibly low-quality products as compared to the imported ones.

Wrap up.

This initiative has been categorized as the desperate need of the time by many people of Pakistan and many thinkers suggest that it should have been done a lot earlier. Moreover, the Employer’s Federation of Pakistan (EFP) also supported the ban on imports. The ban is desirable in the current circumstances of the country and could bring fruitful benefits to the economy if implemented successfully.