The Pakistan government has banned the import of luxury items and several non-essential goods, in a desperate attempt to cut its whopping import bills to save fast-depleting foreign exchange reserves. The move, part of the emergency economic plan rolled by the government, comes as the country's trade deficit surpassed the $40 billion mark.

"This is an emergency situation and Pakistanis will have to make sacrifices under the economic plan. This will have a quick impact on foreign reserves. The ban will have an impact of $6 billion [Rs1.2 trillion]," Information Minister Marriyum Aurangzeb was quoted as saying by The News.

The government, for the first time, has imposed a complete ban on the import of luxury items, she said, adding it will “steer the country” out of the crisis.

The import ban, though a necessary measure, will also impact the government’s revenue as luxury items are usually taxed heavily. The move was expected, especially when the government has failed to raise funds for its foreign exchange reserves. The talks with the IMF and Gulf countries are yet to produce results.

In the first ten months [July-April] of the current fiscal year, the trade deficit was recorded at $41 billion—surpassing the $40 billion mark for the first time in history—while the current account deficit reached $13 billion dollars, despite record inward remittance of over $27 billion, showed data released by the State Bank of Pakistan.

High global commodities of fuel prices are driving up the imports bills across the world, including in Pakistan. Significantly, in April, the current account deficit came down to $623 million in comparison to March, when it was at around $1 billion.

Commenting on the government’s move to ban the luxury imports, Atif Mian, the renowned economist, and professor at Princeton University, said the move was unlikely to work.

“It is important to understand the deeper sources of structural imbalances. For example, one major source is unproductive sectors generating demand for foreign goods,” Mian said in a Tweet.

(SAM)