Government authorities are mulling over options to restrict import of non-essential goods and “curb the enthusiasm”. Without delving into the efficacy of these steps, the question is why restricting these specific goods, when the government could consider services as well? It is easy to ban import of CBU cars or iPhones since these are tangibles, but what about non-tangible services imports, such as recreational travel, or a plethora of folks buying real estate outside Pakistan? The real juice is here, because the end-goal is to save dollars.
Here are some facts. The country paid on average $3.1 billion per year on passengers’ air ticketing and travel related other expenses during FY16-19. The toll was mere $1.0 billion in FY21. The fall in the last fiscal year is due to restriction in the travel, and the savings were over $2 billion a year. The growth of $6 billion (27%) remittances last year was due to less travel. Now with travel opening, these savings are wiping out. There are early signs of slippages in recent months. The minister needs to consider these numbers too, against the popular narrative of exaggerating car import numbers (read: “Car imports and current account”, Nov 29, 2021).
The travel expense peaked in FY18. At that time, the brewing external account crisis was attempted to be hidden by the government. Currency was overvalued, and luxury spending was peaking. Now, there is a sense of urgency and recognition of an external account crisis which is giving cold feet to authorities, which is good, but SBP and MoF should look at the right places.
In the last two months (Sep and Oct), the spent-on leisure travel is increasing. This will grow further with the world opening for travel. Religious tourism thus far is zero but flights from Saudi Arabia are operational now. These two items will put strain on the services import.
Apart from these direct impacts, there are indirect expenses which are not fully recorded. With travel opening, remittances growth is at risk. The government needs to also look at foreign property purchases through FE25 accounts in foreign jurisdictions. The data of property holdings by Pakistani residents might be shocking.
While the government is moving from one country to the other for money to survive and keep afloat, the country’s rich is busy buying on Oxford Street. The math doesn’t add up. The government could devise strategies to tax leisure travel and foreign real estate holdings which are big-ticket items.
Moreover, the liberal regime of foreign exchange in Pakistan may need to be revisited. Businesses make money through protection in the local markets and lavishly spend it outside Pakistan. The top brass of politicians and establishments usually spend their post-retirement lives outside Pakistan. Many have families living outside and are fed from income earned on protection. The overall structure is lopsided with the elite enjoying most of the spoils.
It may be difficult to go down the rabbit hole to fix these irregularities but simply curbing import of cars will not solve any problem.
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