KARACHI: The State Bank of Pakistan (SBP) has said that the regulatory restrictions on car imports under the gift and baggage schemes continued to dent Completely Built Unit (CBU) imports.
“As a result, overall transport imports fell to a 10-year low in first half (July – December) 2019/2020,” according to SBP report on Pakistan Economy issued on Tuesday.
The central bank said that the transport sector’s import demand was especially hit, as auto assemblers, after significantly raising prices following the currency adjustment, are now faced with slumping domestic sales.
The firms responded to the lower consumer demand by cutting back on production, which reduced their imports of CKD kits and other auto parts.
The country’s imports dropped 17.0 percent Year on Year (YoY) to $ 23.2 billion in the first half of current fiscal year – the lowest level in four years.
Import demand for a wide range of energy and non-energy products was suppressed, as industries and consumers adjusted to the second-round impact of the currency adjustment, tight monetary conditions, and some sector-specific policies (in case of oil refineries and steel).
Lower import quantums were complemented by lower international commodity prices (of crude oil, LNG, coal and metals).
The spillover of the downtrend in auto production was felt across the steel industry, whose demand for imported finished products declined.
Finished steel imports were further suppressed after Pakistan imposed anti-dumping duties on some Russian and Canadian steel products into the country in September 2019.
Lastly, imports of items whose domestic production increased this year, such as DAP fertilizer, also declined.
The slowdown in import of vehicles also adversely affected the collection of customs duty. The collection of customs duty has declined by 2.8 percent in first half of current fiscal year.
Within this category, the slowdown mainly stemmed from a decline in collection from imported vehicles; it is worth noting that the import of vehicles has been constrained by regulatory measures as well as an increase in their cost following the currency adjustment.