Pakistan Declares Economic Emergency as It Bans Luxury Imports to Save Foreign Currency Reserves

© AFP 2023 / ASIF HASSANA Pakistani man counts Pakistan's rupees at his shop in Karachi on May 16, 2019
A Pakistani man counts Pakistan's rupees at his shop in Karachi on May 16, 2019 - Sputnik International, 1920, 19.05.2022
Pakistan is the third country in the South Asia region to ban imports of luxury items in order to curb plummeting foreign exchange reserves. The economic crisis in another South Asia country - Sri Lanka - led to political turmoil, forcing Prime Minister Mahinda Rajapaksa to step down from his post.
On Thursday, Pakistan's Shehbaz Sharif-led government imposed a ban on importing all non-essential luxury items under an "emergency economic plan", saying the decision would "save the country precious foreign exchange".

"We will practice austerity and financially stronger people must lead in this effort so that the less privileged among us do not have to bear this burden inflicted on them by the PTI government", Sharif said.

The decision to curb imports came as the Pakistani rupee crashed to an all-time low against the US dollar in the interbank market: at noon local time, one US dollar was valued at PKR 200 in the market, over the ballooning current account deficit and depleting foreign exchange reserves.
The banned list includes cars, mobile phones, makeup items, confectionery items, frozen meat, frozen fish, luxury items, lights, chandeliers, bathroom items, and cigarettes.
Opposition party PTI has said measures to ban the items will be inconsequential, accusing the newly-formed government of destroying the businesses of small shopkeepers.

"Millions of traders and shopkeepers will be affected by these steps and it will also have an effect on bilateral trade", Hammad Azhar, National Assembly member of Pakistan Tehreek-e-Insaf, said, arguing that the banned items only made up a small percentage (around $1 bn) of the country's import bill.

On Wednesday, Pakistan restarted negotiations with the International Monetary Fund, seeking a second tranche of the financial package of $6 billion to support plummeting foreign reserves, which stand at $10.3 billion. The forex reserves can support only two months of imports.
Pakistan is the new entrant in the list of countries facing a forex crisis in the South Asian region, as Nepal earlier also announced similar restrictions on imports of luxury items.
Sri Lanka has been facing an unprecedented economic crisis triggered by the drying up of foreign exchange reserves due to a fall in tourism income and the pandemic-induced lockdown.
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