Proposed measures to restrict luxury imports in Pakistan

ISLAMABAD: The interim government is in the process of implementing more stringent regulatory duties on a wider range of luxury and non-essential imported goods, as part of a broader strategy to address the rapid depletion of the country’s limited foreign exchange reserves. This initiative comes within six months of previous measures being imposed.

Last year, Pakistan’s overall imports reached $55 billion, with a significant portion allocated to oil imports at $17 billion. The food sector accounted for a substantial portion, with $9 billion in total imports, including $3.6 billion for palm oil. Textile imports stood at approximately $3.7 billion, including $1.7 billion for raw cotton.

Last August, stringent regulatory duties were introduced in response to international pressure when the previous government faced calls to lift a complete import ban. While the World Trade Organization prohibits indefinite import bans, governments can impose regulatory duties under varying conditions.

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Officials indicate that this time, around 1,100 items will be subject to varying levels of regulatory duties, nearly 30 percent more than the approximately 860 items that faced higher regulatory duties in August last year. Additionally, there are discussions about altering import regulations for three-year-old vehicles, both small and luxury. Interestingly, many of the items under consideration for regulatory duties are essential intermediary raw materials for export-oriented sectors, including textiles and chemicals.

The Finance Ministry is pursuing a petroleum products pricing policy that excludes subsidies, aiming to recover the full cost of imports, including exchange rate losses, while imposing significant taxes through a petroleum levy capped at Rs 60 on petrol and Rs 50 on diesel. This levy is designed to maintain an average annual petroleum levy of Rs 55, as agreed upon with the IMF. There are speculations about potential increases in the diesel levy in the coming months.

Among the changes, vegetable and cooking oil will be among the major items facing regulatory duties, aimed at reducing consumption and minimizing foreign exchange losses. Regarding automobile imports, sources suggest that small vehicles will be allowed for overseas Pakistanis remitting $50,000 per year, while the limit will be higher, exceeding $5 million, for luxury vehicles such as 4x4s.