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September 11, 2018

Say cheese?


September 11, 2018

With headlines blaring ‘cheese to the rescue’, the should-have-been (and probably was) serious discussion in the Economic Advisory Council (EAC) on banning selected imports seems to have gotten lost somewhere due to the admittedly strange cheese focus. However, amidst the questions over whether Naya Pakistan will have decent pizza or not, there has been an attempt to highlight a more basic fact: cheese imports stand at around $13 million, or around 0.03 percent of Pakistan’s annual imports. Did the EAC not have basic import statistics available before coming up with suggestions? Are goods going to be banned based on a whim? Pakistan’s trade deficit stands at around $37.7 billion. The need to take serious measures to cut the ballooning trade deficit has been highlighted a number of times. There is certainly a case for import bans but these would make sense if they address the import sectors that have ballooned in the last five years. Pakistan’s top imports include fossil fuels, machinery, electrical equipment, iron, vehicles, plastics, organic chemicals, animal fats and oil seeds. Amongst the more sensible proposals on the table is the ban on the import of luxury vehicles.

The first target of any import ban – if a country must go towards this option – should be luxury items. (Some would say luxury items could also include cheese, as part of a broader strategy). Much of the current criticism has arisen due to the ad-hoc nature of the items put on the table. The idea seems to be to cut imports by around $5 billion and generate around $2 billion extra through exports. But one might want to look into whether any bans on European goods could result in retrospective bans on Pakistani exports. One would also wonder whether the answer lies in simply increasing tariffs further, like the last government did, on luxury goods. High tariffs provide a good source of income for the government and so act as deterrents. Short-term measures, such as import bans, could be effective as part of a larger strategy for addressing the issue – but cannot be the ultimate strategy in itself. One would hope that the presence of such a high-powered council of advisers would lead to more substantive policymaking. Taking a piece-meal approach will continue to generate headlines for the wrong reasons. Drastic measures can and should be on the cards to avoid an IMF bailout, but the path Pakistan chooses to get out of this mess will determine if we can beat it or get stuck again.

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