Dollar's ascend continues against descending rupee: Heavy regulatory duty on luxury items on cards

ISLAMABAD: The government is contemplating different options to jack up regulatory duty (RD) on import of dozens of luxury items such as import of automobiles, cosmetics, master baths, varnishes, stationary, different products of textiles, sweeteners, non-essential food items, and others.

The government has decided for moving ahead with taking fiscal measures in order to curtail the rising current account deficit that had already ballooned to $2.3 billion in the first two months (July and August) of financial year 2021-22.

“All ministries concerned are preparing lists of luxury imported items on which the rate of regulatory duty will be increased manifold in order to curtail rising import bill,” top official sources confirmed to The News on Friday.

The Tariff Policy Board is scheduled to meet next week and, after holding deliberations and decision making in the upcoming board meeting, a summary will be moved to get the approval of the ECC and the cabinet.

The Ministry of Industries and Production has proposed imposition of 50 per cent regulatory duty on the import of electric vehicles (EVs) having more than 50 kWh battery packs. Due to a decrease in Custom Duty on EVs in completely built-up unit (CBU) condition from 25 to 10 per cent, the import of high and EVs may result in increase in the current account deficit.

The purpose of EV policy is to promote local manufacturing whereas the import ofhigh and EVs has increased due to reduction in Customs Duty. Such measures will discourage the import of high and EVs in CBU conditions.

There is another proposal to increase RD on hybrid vehicles (CBU) from 15 per cent to 50 per cent on 1501cc to 1800cc. This intervention will discourage the import of vehicles in CBU conditions and improve the current account deficit.

The regulatory duty on CBU import (normal gasoline vehicle) is to be increased from 15 to 50 per cent. There is another proposal to enhance Federal Excise Duty (FED) on locally manufactured cars/ SUVs from 1501cc and above to 10 per cent from the existing rate of FED of 5 per cent.

The FED on 1501cc to 1800cc cars/SUVs should also be enhanced to 10 per cent from 5 per cent. There are some proposals where textile-related products are also under consideration for making adjustments in RDs and CDs.

The State Bank of Pakistan projected the current account deficit in the range of 2 to 3 per cent of GDP, equivalent to $6 to $9 billion for the current fiscal year; however, the independent economists had feared that it might escalate to $10 to $12 billion till end June 2022.

The SBP, meanwhile, issued new regulations, requiring banks to report $500,000 and above future foreign currency requirements for overseas buying, apparently in a move to step up monitoring of money flows and to make rupee less volatile.

The SBP issued new guidelines making mandatory for banks to submit information related to their all forthcoming imports payments of $500,000 and above for the next five days. Meanwhile, the Pak Rupee (PKR) ended almost flat against the dollar in the interbank market on Friday and dealers said the local unit would remain stable in the coming days.

The rupee closed at 169.08 per dollar, compared with Thursday’s close of 169.03. In the open market, the rupee ended at 170 to the dollar. It finished at 169.80 in the previous session.