LAHORE: Planners explaining the reasons for rising prices do not reduce the plight of the people. They blame the global phenomenon for the disruptions, but these were the same everywhere, including regional economies, which managed to keep inflation under control.
It is of no help to consumers that oil rates in Pakistan are the lowest in the region. For them, the sharp increases of Rs 5 per liter in the price of gasoline or diesel twice in the past four months are embarrassing.
Pep speaks that the price increases caused by expensive imports do not alter the reality that purchasing even essential items has become beyond the reach of the general public. In addition, imports are expensive because the rupee has been massively devalued.
The import regime is designed to increase the landed cost of imports through sales tax, import duties, regulatory fees and, in some cases, excise duties and other government levies . The planners’ assertion that higher levies are applied to reduce imports has been found to be false.
Imports continued to increase despite higher tariffs on luxury items and basic necessities. When it comes to luxury imports, the 5-10% minority controlling 80% of the national wealth has no problem paying the price to buy the products of their choice.
Essentials, as the name suggests, are necessary consumer goods like wheat, sugar, and edible oil that every citizen is required to consume on a daily basis. Prices have gone up because the government is slapping money on imports through its levies.
Government revenues at the import stage have increased massively every time the rupee has depreciated. Why can the government not impose a nominal duty and other levies on the import of edible oil? This could reduce the landed cost by at least 25 percent.
Likewise, why can’t the government double or triple the import duties on luxury cars and charge the same on electric vehicles.
It will reduce their imports to some extent and significantly increase import levies to compensate for the loss of income if granted on the import of essential products.
The Pakistan Business Council (PBC) which recently spoke out in support of government policies finally pointed out that the current account deficit or inflation was not due to the overheating economy as many people claim. – government speech.
The PBC believes that with rising fuel costs, the government should prioritize conservation and fair prices rather than considering increasing policy rates or tariffs. Regarding tariffs, the tariffs for luxury items must be increased to a level that discourages luxurious living.
We are a very poor country which survives on regular borrowing and cannot afford a luxurious lifestyle. By effectively limiting luxury imports, we will save foreign currency and therefore control the depreciation of the rupee.
The other alternative of controlling the fall of the rupee with a higher policy rate has many drawbacks. First, it would increase the cost of borrowing for the private sector, which is already reluctant to seek loans from banks.
Second, it would increase the cost of servicing the debt of the government, which is already the biggest borrower of commercial banks. The rupee can only be stabilized by effectively reducing imports or massively increasing exports or raising interest rates.
The government would need strong political will to limit unnecessary imports. Consumers of luxury goods are the most influential people in the country.
The state should start by prohibiting the importation of even bulletproof cars to Pakistan’s most powerful figures. It consumes foreign currency and deprives the state of millions of revenue from the importation of each of these vehicles.
This measure would send the message that by denying privileges to its own elite, the government is serious.
Pakistan is in dire need of revenue and the Federal Board of Revenue has done a good job of increasing revenue over the past three months. This is not enough because we have to double the income to get rid of the loan.
The point of sale initiative is a bold step. It is intended to eliminate corruption from both traders and revenue collectors. The program was going well until only the largest outlets were targeted.
These outlets were owned by influential businessmen and were not lucrative clients for tax agents. But now that the RBF command has started targeting the mid-sized retail cadre, it is hurting the interests of buyers and bribers. A protest movement is launched against point-of-sale registration.
To resist successfully will be a test of the will of the government. If traders are successful, it may force the finance minister to resign.