The Economic Coordination Committee (ECC) proposed sweeping changes to fix the trade imbalance at its meeting presided over by the cabinet. The changes were extensive and geared towards improving exports and limiting imports to lessen the trade deficit of the country. To discourage imports, the committee imposed 5-25pc regulatory duties on about 250 items. In order to promote exports, the ECC put forward a proposal under which 50pc of the incentive package for exporters for eligible textile and non-textile sectors would be provided without any condition of increment. The committee also worked upon an idea to deregulate diesel, despite strong opposition from the Oil and Gas Regulatory Authority (Ogra).
From a theoretical perspective, these reforms look strong and the government should be appreciated for trying something proactive to slow down the growing trade deficit. On a practical note, the increase in taxes on imports could fare badly for the consumer. It is a smart move that most of the taxes on imports are to be conducted on luxury items such as shampoos and mobile phones as they are safest option and one that Pakistan overindulges in importing. However, the taxes on items related to the agriculture sector might be worrisome as it opens a way for abuse by local producers. Collection of taxes and duties are also a weak link in the system which could hamper reform.
The idea to deregulate diesel looks good on paper, however, for it to be effective, there needs to be a change in the diesel and petrol oligarchy of Pakistan. To deregulate diesel, the government also needs to ensure fair competition and right now, these conditions are not in place due to the hegemony of petrol cartels. Getting rid of government regulation could leave consumers victim to high prices set by the monopoly of oil marketing companies.
As with everything, an idea can only be effective if its implantation is. The government should be commended for positive reforms, however, for these to produce results; it has to fix the flaws in the system.