CURRENT Account Deficit (CAD) is once again surfacing asa major challenge for the government to confront with.
It touched $ 5.1 billion in the first four months of current fiscal year against the target of confining it to $ 2.3 billion.
In this backdrop, the government is compelled to take some drastic steps and most important ones are discouraging imports.
In principle, the government has reportedly decided to impose a temporary ban on the import Completely Built Unit (CBU) of vehicles as well as jacking up regulatory duty and additional customs duty on ten to eleven other luxury items in order to check the CAD.
The government is expecting to curtail the deficit to the tune of $ 3 billion dollar on annual basis by placing a ban on imported vehicles.
As regards this specific ban, there are so many things wrong about our Automobile industry and one of them is the import of these CBUs. The auto companies, especially the new entrants, are importing thousands of CBU vehicles and causing billions of dollars in account deficit to the country.
A total of 10,513 new vehicles were imported in Pakistan in the last fiscal year whilst in the first two months of current fiscal year, car companies imported CBU vehicles worth $ 103 million, 118 percent higher compared to $ 47 million in the same period of last year.
In addition, the car companies also imported CKD/SKD kits worth $ 369 million in the first two months for local assembly of their vehicles.
The fact of the matter is that when new auto companies entered our market, the government allowed them to import 100 CBU units per variant with tax relaxation.
The aim was to encourage these new companies to test their products in the market and then invest in the local production of these cars.
After receiving an overwhelming response, the companies instead of working on local production started taking more bookings for the CBUs.
Hence, we really welcome the latest decision of government of banning the CBUs which was causing loss to the economy. The auto companies must fulfil their commitment and establish their manufacturing
plants to move towards local production.
Pakistan is a big market and there is great potential of growth in the automobile sector. The government should provide incentives to those showing intent to establish local manufacturing plants.
