Karachi, August 27, 2023 – Pakistan finds itself grappling with a severe scarcity of US dollars for its foreign obligations, but an unexpected development has emerged amidst these economic challenges. In July 2023, the import of Completely Built Unit (CBU) motor vehicles witnessed a remarkable surge of 51%, defying economic odds.
Official statistics reveal that CBU motor vehicle imports skyrocketed to $14.27 million in July 2023, up from $9.45 million in June of the same year. Analysts attribute this surge primarily to the relaxation of import payment regulations by the State Bank of Pakistan (SBP), a move aimed at alleviating some of the economic pressures the nation is currently facing.
However, this apparent respite in import regulations has coincided with a sharp depreciation of the Pakistani Rupee (PKR) against the US dollar. On August 25, 2023, the PKR reached an all-time low of 301 against the dollar in the interbank foreign exchange market, underscoring the volatility and challenges faced by Pakistan’s currency.
It’s important to understand that Pakistan had maintained a strict policy of import restrictions on luxury and non-essential items for an extended period during the past fiscal year. However, the country was compelled to relax these restrictions as part of its commitments under the International Monetary Fund (IMF) loan program.
As a result of these import restrictions, year-on-year motor vehicle imports had previously seen a 48% decline, with July 2022 recording imports at $27.51 million.
In addition to the surge in imports, Pakistan is struggling with a severe shortage of foreign exchange reserves to fulfill its external payment obligations. The foreign exchange reserves of the country have been steadily dwindling, with the State Bank of Pakistan reporting a decrease to $13.248 billion by the week ending August 18, 2023, compared to the $13.379 billion recorded just a week earlier on August 11, 2023.
It’s crucial to note that the current level of foreign exchange reserves is significantly lower than the peak observed in August 2021 when the reserves stood at a robust $27.2 billion. This stark contrast highlights the ongoing challenges faced in maintaining a secure economic foundation in Pakistan, with the nation’s economic stability teetering on a precarious edge.
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