Pakistan ponders drastic cut in imports to curb eroding reserves

Business News

Jul 11, 2008, 12:42 GMT

Karachi - Pakistan is planning sweeping reforms to rein in rising imports amid dwindling foreign exchange reserves and a record trade deficit, official sources at the country's central bank said on Friday. Among the measures is a firm ban on some items, while hiking up taxes and duties on other non-essential imports. 'We need to tighten up our import regime against all non-oil and non-essential items to avoid (the) flight of foreign exchange reserves,' a senior official said. The country's trade deficit ballooned already to an all-time high of over 20 billion dollars in the previous fiscal year, which ended on June 30, according to a Federal Statistics Bureau report. High international oil prices have been blamed for the soaring gap as the central State Bank of Pakistan lost 4.5 billion dollars in the last six months. 'Our foreign exchange reserves are at dangerously low level and barely enough to meet around 4 months of imports in the face of shrinking exports,' economist Mohammed Sabir at the Social Policy Development Centre said. As a first step, the central bank on Wednesday put a bar on forward buying of foreign currency by importers. The measure effectively ended hedging against imports and also helped to reduce speculation in the forex market. This led to the recovery of the Pakistani rupee by around 5 per cent in three days to come down to the 70 level against the dollar on Friday as compared with 74.60 on Tuesday. The rupee has lost around 18 per cent since January while the benchmark KSE-100 Index of the main Karachi bourse lost 30 per cent as nervous foreign investors left the country in the face of increasing economic and political woes.

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Pakistan ponders drastic cut in imports to curb eroding reserves

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