ISLAMABAD: The surging duty-free arrival of goods has posed a serious threat to the government’s efforts to curtail the overall import bill, which may lead to a higher than expected trade deficit in the current fiscal year.

The value of duty-free imports in February rose 42.41 per cent to $2.67 billion from $1.87bn in the same month last year.

The duty-free imports saw a massive increase almost double in November and December 2021, respectively. However, a gradual slowdown was seen in January and February.

Official figures available with Dawn showed that the dutiable imports also saw a growth of 18pc to $3.22bn in February from $2.72bn over the corresponding month last year.

The dutiable imports are those which are subject to customs duty, withholding tax and federal excise duty at the import stage.

The country’s overall import bill in February jumped 28.09pc to $5.89bn against $4.6bn in the corresponding month last year.

An official source told Dawn that the rise in duty-free imports is mainly because of an increase in the value of commodities as well as raw materials. During the last budget government has slashed regulatory duty, additional customs duty on raw materials, which spurs economic activities, the official said.

According to the official, the increase in imports of food items also contributed to the duty-free import bill.

Between July to February 2021-22, the duty-free imports grew 66pc to $23.42bn from $14.11bn over the corresponding months last year. And the dutiable imports posted growth of 47.88pc to $29.21bn in 8MFY22 against $19.75bn in the corresponding months last fiscal year.

Despite the rising trend in imports of duty-free products, the customs duty collection saw a growth of 21pc in February to Rs72bn against Rs58bn in the corresponding month last year.

In the first eight months, the customs duty collection soared 39pc to Rs622bn against Rs454bn over the corresponding months of last year. The target was 567bn for July-February 2021-22.

The tariff rationalisation efforts in the last two-and-a-half years have brought the trade weighted average tariff of Pakistan down from 9.07pc in 2018-19 to 7.07pc in 2021-22.

Since 2018-19, the tariff on 6,000 inputs — raw materials, intermediate and capital goods — had been rationalised. As a result, almost 40pc of total inputs in terms of the number of tariff lines, as well as the value of imports, are at zero duty.

This has improved the competitiveness of the industry witnessed 3.4pc growth in LSM in the first half-year and 25.88pc increase in exports in the first eight months of this fiscal year.

The government has established the Tariff Policy Centre (TPC) headed by chairman National Tariff Commission in 2019 and shifted tariff policy-setting powers from the Federal Board of Revenue (FBR) to the Tariff Policy Board (TPB) led by the commerce minister. The TPC proposed tariff reduction on products which was approved by the TPB.

Published in Dawn, March 13th, 2022