PM wants imports from China in yuan

ISLAMABAD: Prime Minister Imran Khan has directed Commerce Ministry and State Bank of Pakistan (SBP) to look into the possibility of encouraging imports from China in Chinese Yuan (CNY) instead of US dollars, well informed sources told Business Recorder.

These instructions were issued at a meeting of “economic team” held on November 9, 2021, progress on which will be submitted in two weeks.

Commerce Ministry and Federal Board of Revenue (FBR) were directed to come with a plan to identify and temporarily restrict luxury imports.

Prime Minister Office has also urged the Commerce Ministry and SBP to take action and comply with the directions of Prime Minister as per given timelines, the sources added.

The issue of currency for imports is the domain of Finance Ministry which can decide about currency swap/ RMB lines.

Background interviews with the officials indicate that any decision on the strategy to trade in CNY instead of US dollars is the domain of SBP and Finance Ministry, with the two already holding consultations on this issue.

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However, Commerce Ministry has started work on the export strategy including removal of Chinese non-tariff barriers.

The information gathered indicates that after implementation on FTA-II with China from January 2020 exports to China increased for two or three months. However, with the onslaught of Covid-19 the exports to China declined but they have again started gaining momentum.

Ministry is conducting an exercise to determine which export items are increasing, decreasing or stagnant and what is the potential of each item in the Chinese market, which would require more focus.

On import side, similar exercise is being done by the Ministry, as a Special Cell for China has been established to facilitate the bilateral trade between the two countries. The exercise will also analyze the reasons behind not exporting those items to China, which are being exported to the United States or Europe.

Pakistan’s exports covered in the FTA-II have posted reasonable growth during 2020-21 which have also showed positive trends during the first four months of FY 2021-22. However, the main concern is that growth has not been witnessed in all the tariff lines of FTA-II.

“Now the Ministry is engaging the industry and asking them to approach their Chinese buyers and Pakistan’s Trade and Investment Officers stationed in China to know the reasons behind not increasing export of those items,” the sources added.

They said that there are several non-tariff barriers in China which are hurting Pakistan’s exports. The government is thinking of the ways and means to take up this issue with the Chinese authorities at technical and political levels so that these barriers are removed.

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To a question, an official said that presently imports are divided in three or four groups which are as follows: (i) raw materials and intermediaries- these are showing growth as per projections of Commerce Ministry.

These items are improving industrial production and subsequently exports. There is no need of any intervention in this group; (ii) energy heads -the major impact has been witnessed in energy-related products which are not controlled by the Ministry of Commerce.

The decisions related to energy imports are being taken by other forums or Ministry; (iii) import of wheat, sugar and Covid vaccine- wheat and sugar are the areas of Ministry of National Food Security and Research. Import of these commodities has been minimized but it will continue as per requirement to ensure food security.

The Ministry of Economic Affairs has already arranged dollar cover for vaccines which will be subtracted from the import bill; (iv) vehicles import - increase in import in vehicles and their parts is direct consequence of auto policy as CBU of new auto companies and CKD of new and existing companies are also being imported.

This was the decision of Ministry of Industries and Production instead of Ministry of Commerce. Increase in duties on parts of vehicles has already resulted in increase in price in the local market. With increase in local production, import of CKD has also increased.

There is no issue of foreign exchange in import of used cars as their payment is made in the accounts outside Pakistan; and (v) consumption items - there are many items on which 100 per cent cash margin have already been imposed.

Another reason for the growth in imports is related to GDP growth and overall economy like consumption of energy including POL products, RLNG, etc, whose import cannot be squeezed if Pakistan has to go for higher GDP growth.

The role of Commerce in imports is just linked to raw materials, intermediaries and some other products of consumptions, and not to all imports.

Copyright Business Recorder, 2021