Page 9 - TEXtalks. November-December 2022

09

Pakistan Import issues

and the textile scene

Hope for the best and be prepared for the worst

The State Bank of Pakistan has imposed For more than four years, we have been
restrictions on imports because of a shortage of maintaining our reserves on six monthly additions
dollars a month after the present regime assumed of about $3 billion loans. These loans were
office. It has now removed these on machinery, consumed for six months and we somehow
cars, mobile phones, and some other imports arranged another $3 billion again for consumptive
despite higher dollar shortages. purposes. There is certainly more to it than what
meets the eye in such situations.
One fails to understand how the commercial banks
are able to arrange dollars for opening of these There is no way these imports could be normalized
letters of credits. The central bank would not supply without hefty inflows of dollars, as SBP reserves are
them with dollars, they would have to arrange it not enough to cover even a month of normal-pace
through importers from the open market. There is a imports. And the actual restrictions are just
difference of Rs10 in the open market and growing. The textile sector somehow managed to
inter-bank rate. The gap would further increase get permissions on import of raw materials like
and the official rupee value would come under cotton and accessories but they were hardly
further pressure. facilitated in case of import of machinery. The
situation would remain the same or even worsen as
This seems to be an attempt on the part of the SBP the forex reserves have depleted to below $6 billion,
to pass the buck to the commercial banks and hardly enough to finance our five weeks imports if
ease pressure on itself. The situation would we stop all other foreign payments.
practically remain the same until we shore up our
reserves substantially. This is also an attempt to Textile sector would sail in the same boat as other
pacify the IMF that has been demanding withdrawal importing sectors until the expected foreign inflows
of restrictions. Though realistically speaking the IMF materialize that are linked to the resumption of IMF
has got no morale right to demand such actions program and release of withheld tranches by the
knowing well our precarious foreign exchange Bretton Woods institution.
situation. A free import regime would accelerate the
chances of default as we would run out of foreign Let us face the reality that we are in a scary
exchange needed to service our foreign debt and situation. If the inflows are not immediately
import liabilities. arranged we may be forced to ration even essential
exports. The textile issue would be on the back
Many experts might disagree with the SBP burner. Let us hope for the best and be prepared
restrictions but can they suggest any alternative. for the worst.

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