Ban on luxury items' import to benefit country PM.

The federal cabinet on Thursday banned import of around 41 items for two months to forestall a looming default but the measure appears to be too little, as it would contain the import bill by hardly $600 million or less than 5% of projected imports.

The decision will hit the imports of cars, mobile phones, cosmetics, cigarettes, food products, certain garments and toiletries. The federal cabinet approved the summary to ban the imports through circulation after a series of meetings held at the Ministry of Finance and Prime Minister Office.

'My decision to ban import of luxury items will save the country precious foreign exchange. We will practice austerity and financially stronger people must lead in this effort so that the less privileged among us do not have to bear this burden inflicted on them by the [previous] PTI government,' PM Shehbaz Sharif tweeted. He further stated that together 'we will overcome all the challenges with resolve and determination'.

It is the first major policy decision that the coalition government has taken, which will now pass through the scrutiny of the World Trade Organization (WTO) and the International Monetary Fund. The WTO encourages member countries to keep international trade open but allows temporary restrictions under certain circumstances including stalling a balance of payments crisis.

Import of the items have been prohibited to support the balance of payments position, according to the cabinet decision. It decided that the prohibition will not apply on the imports in rupees or through barter mechanism by land routes.

The prohibition on import of these items may be reviewed after two months, the federal cabinet decided.

However, the step, which is also the first serious move by the coalition government, appears to be too little. The prohibition of imports would curtail the monthly import bill by $280 million to $300 million, according to the Federal Board of Revenue official. This saving is hardly 5% of the monthly import bill of $6.6 billion.

For the current fiscal year, the previous Pakistan Tehreek-e-Insaf government had targeted to restrict the imports at $55 billion, which according to the Pakistan Bureau of Statistics have already shot up to $65.5 billion during the first 10 months.

The Ministry of Commerce has projected that the imports would now grow to $77 billion by the end of June. The projected $600 million saving would be around 5% of the annual bill.

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