Ever Since its independence, Pakistan has been facing an on-going economic crisis. The economy of a country is crucial in determining its sovereignty, development and prosperity. From time to time, reforms are brought and policies are made to stabilize the economic condition, but due to a number of factors, the objectives are left unaccomplished. Such factors can include the lack of knowledge and experience at the policy makers end, financial corruption in different sectors, failure in implementation of the policy, political instability, etc.
History has witnessed the country suffering from economic rise and falls. Unfortunately, this remunerative rollercoaster has only worsened the economic condition of Pakistan over time. According to a recent report on external debt of Pakistan, the totality of the debt has reached more than 60 trillion Rupees. Unfortunately, the country is still not in a position to pay off debts. In fact, it continues to ask for financial aid. But as there is no such thing as a free lunch, there are always circumstances in play. In simple words, Pakistan has to abide by the conditions set by monetary unions in order to continue receiving financial aid.
A recent example is the ban imposed by the government on the import of luxury goods. However, a U-turn was taken in less than three months- and the ban was lifted. If it was to be taken down eventually, why was the ban imposed in the first place? Interestingly, it was re-imposed in the following months. How did the ban, the removal of it, and its reimplementation impact Pakistan’s economy?
Imports And Exports: Two Pillars Of Economy
Imports are the goods or services that a country buys from other countries whereas exports are defined as goods and services that are sold overseas. When the imports of a country are greater than its exports, it suffers from a trade deficit. In other words, the economy faces a shortfall.
To overcome this situation, the state has to ask other countries for financial aid or borrow money from International monetary unions. Which means that it takes heavy debts that are to be paid off with a certain amount of interest. On the other hand, a country has a trade surplus if its exports exceed the imports. This brings prosperity and economic stability to the land.
Pakistan exports textile goods, rice, mangoes, sports goods etc. and imports oil, petroleum, machinery, pharmaceuticals and so on. According to the Pakistan Bureau of statistics, the exports were recorded 25.304 billion US dollars while the imports were 56.380 billion US dollars for the year 2021. This clearly indicates that Pakistan imported more than it exported. A shortfall was experienced and despite the already existing debts, the IMF was called upon for financial aid.
Ban On Luxury Items: A Boon Or A Bane.
The economic crisis reached new heights after the historic devaluation of Pakistani currency. In order to aid the struggling economy, the government imposed a ban on luxury goods on May 19, 2022. These luxury goods included decoration items, smartphones, cosmetics, automobiles, musical instruments etc. Citizens were not pleased by this decision at all but luckily, the trade deficit was reduced by 30%. In other words, the country bore relatively less economic loss after the ban than it did before. This was a huge economic success.
Having said that, the ban wasn’t entirely advantageous. It had a number of drawbacks. Despite being categorized as non-essentials, the luxury goods were high in demand. A large number of people shopped for them for personal or commercial use. The local market did not hold the capacity to manufacture these products therefore, customers relied heavily on imports. After the ban, these items could not be procured through imports, nor were they produced within the country. As a result, many businesses suffered. Moreover, the ban increased the risk of smuggling.
Lifting The Ban: A U-turn Or A Compulsion
On 28th July, the same year, the Economic Coordination Committee decided to lift the ban except on the Completely Built-up items. The decision was made to regulate healthy relationships with the trading partners and keep barter trade from getting affected due to the ban.
During a press conference on 18th Aug, 2022, the finance minister informed the media of removing the prohibition completely. So, why did the government agree to lift the ban all of a sudden, when the PM had refused to do so a number of times?
It was done to comply with the International Monetary Fund’s conditions for promoting healthy trade and commerce between different trade unions. The ban was clearly hindering the trade and therefore had to be lifted.
Even though the government had to draw up the ban, the Federal Board of Revenue (FBR) imposed heavy taxes on luxury items to balance the crisis. Heavy duties i.e., Regulatory duties (RD) and Additional Custom Duties (ACD) were put on the luxury items. This means that one will have to pay a lot more than the actual price (double the price in most cases) for purchasing a luxury item. However, reinstatement of the ban was a huge step taken by the government to tackle the economic condition. This step, which was apparently made to help stabilize the economy, showed a number of consequences in the form of escalating inflation. As a result, every citizen is being affected, in more than one way, and things keep on getting worse.
The Bottom Line…
A country cannot truly progress unless it attains economic stability. In order to attain economic stability, we must be self-sufficient. This can only happen when the local market is upgraded and provided with the environment and expertise to manufacture products and goods that are in demand, and meet international standards.
Whether it’s the educational sector, agricultural sector or industrial sector, all need to work on upgrading themselves. Pakistan must increase its production rate to meet the consumers’ needs within the country as well as overseas. The need of the hour is to stop reaching out to different states and monetary unions for help. If the state still continues with this course of action, it might completely lose its free will.
For how long, then, will we continue to rely on others? It’s time to be truly independent and stand on our own feet. We, as a nation, are capable of accomplishing extraordinary feats. It might sound difficult but all it takes is an action. And we must take one before it’s too late.
