Despite the Pakistani government’s efforts to restrict the import of luxury and non-essential items, the import of Completely Built Unit (CBU) cars into the country experienced a significant surge of 146 percent on a month-on-month (MoM) basis in April 2023.
This development comes at a time when Pakistan is striving to prevent an economic disorder, particularly as its loan program with the International Monetary Fund (IMF) hangs in the balance.
According to the Pakistan Bureau of Statistics (PBS), the country paid a total of $7.32 million for the import of CBU motor cars in April 2023, compared to $3.03 million in March 2023. This substantial increase indicates a growing demand for imported cars, despite the government’s attempts to limit unnecessary imports and curb the outflow of dollars.
The recent surge in car imports raises concerns about the country’s foreign exchange reserves. The official foreign exchange reserves of the State Bank of Pakistan (SBP) experienced a decline of $71 million, reaching $4.312 billion by the week ending on May 12, 2023, compared to $4.383 billion the previous week. The scarcity of dollars in the country has also contributed to a significant depreciation of the local currency. Over the past year, the Pakistani Rupee (PKR) has witnessed a massive 43 percent decline, with the exchange rate reaching PKR 285.82 to the dollar on May 19, 2023.
In an effort to prevent dollar outflows, the government had imposed a complete ban on the import of luxury and non-essential items in May of the previous year. However, due to international obligations and mounting pressure, the ban was lifted in August 2022. Despite this, the government still maintains a policy of prioritizing foreign trade payments to ensure the maximum retention of dollar reserves within the banks.
While the import of CBU cars saw a remarkable increase in April 2023, it fell by 61 percent when compared to the previous month’s figure of $18.89 million. Moreover, the aggregate import of CBU motor cars during the ten-month period from July to April in fiscal year 2022-2023 amounted to $56.74 million, reflecting a significant decline of 78 percent compared to $263.45 million in the same period of the previous fiscal year.
These developments highlight the challenges faced by the Pakistani government in controlling the import of luxury items and managing its foreign exchange reserves. As the country strives to stabilize its economy and meet its financial obligations, monitoring and regulating imports will remain crucial in ensuring a sustainable economic growth trajectory.
READ MORE: Honda Atlas Cars (Pakistan) set to resume production operations
