The government has finalized a ‘mini-budget’ involving fiscal adjustments and expenditure cuts worth nearly Rs 600 billion as part of an understanding with the International Monetary Fund (IMF) to cool down the over-heating economy. The steps are being described as the “prior actions” that will pave way for submission of Pakistan’s request to the IMF board for approval in the middle of January. The board’s approval will ensure the release of $1bn for the country.
Apart from several other drastic measures, those related to the automobiles are:
- Government has decided to consider imposing regulatory duty on the import of electric vehicles (EVs) to lower its import.
- At the same time, the government in the mini budget had lowered duty on electric vehicles to encourage its use in the domestic market.
- Import of CBU (completely built units) vehicles of all types be restricted and regulatory duties will be imposed across-the-board.
- Imposition of federal excise duty on CKD/SKD is also under consideration, which amounts to more than 80% of the total imports in the automobile sector. The CKD/SKD imports again posted a massive increase in the month of November.
- The facility of corporate guarantees against disputed import duties be reversed. Now it will be replaced with a bank guarantee or pay order.
- Federal Excise duty (FED) on vehicles above 1800cc will also be increased.
Pakistan has witnessed record foreign exchange spending on highest-ever arrival of new automobiles in 2020-21 with 10,513 units in FY21 compared to 1,680 units in FY20, 3,716 units in FY19 and 7,424 units in FY18. According to information, the current account deficit had touched an alarming $5.1 billion during the first four months (July-October) of the current fiscal year (FY2021-22) against $2.3 billion, approved by the parliament and the National Economic Council (NEC) for the entire fiscal year.
Now the government is worrying that with the existing pace, the deficit might cross $15 billion mark for the current fiscal year which is 6 times more than the initially approved cap. The decision makers hope that the above mentioned desperate measures will help cool down the impact of rising imports against insignificant exports.
A computer animation professional with over 23 years of industry experience having served in leading organizations, TV channels & production facilities in Pakistan. An avid car enthusiast and petrolhead with an affection to deliver quality content to help shape opinions. Formerly written for PakWheels as well as major publications including Dawn. Founder of CarSpiritPK.com