‘Are luxury goods really the problem?’

I would like to compliment Rumman Ahmed on his erudite and timely article on whether banning the import of certain goods would assist in addressing the very large imbalance on Pakistan’s trade account. He estimates, correctly in my view, that it may at best reduce imports by up to 1.5 billion dollars. That would be a drop in the ocean. The negative effects could be losses in revenues (because of smuggling primarily), loss of employment and a generally negative effect on the growth of services associated with the setting up of shopping malls.

There is a somewhat broader issue at stake here as well. That is a rolling back of the liberalised tariff reforms which different governments implemented over a period of a decade, between 1992 and 2002. The new government would do well to resort to the traditional solutions that have always worked in Pakistan in the past: flexible exchange rates and curbing domestic demand through lower budget deficits and higher interest rates.

Lahore Mueen Afzal