Pakistan formally authorised the relaxation of an import ban on all sorts of commodities on Friday, but slapped up to 100pc fines on items that arrived at ports before the end of July despite restrictions, removing an irritant in trade relations with the European Union and other nations.
The cabinet’s Economic Coordination Committee (ECC) made the decision a day after Finance Minister Miftah Ismail stated the government was lifting the restriction to address concerns raised by the International Monetary Fund (IMF), despite the premier’s misgivings.
The ECC also changed its LNG policy to allow Qatari investment in an 800mmcfd under-construction LNG facility ahead of Prime Minister Shehbaz Sharif’s visit.
The policy’s easing will allow for increased LNG import capacity, which will help secure reliable energy supplies as the gap between supply and demand widens. According to the Ministry of Finance, “the ECC determined that the ban may be withdrawn on all the commodities due to severe concerns made by trading partners over the imposition of the embargo and given the fact that the prohibition has affected supply chains and the domestic retail business.”
The ECC had earlier suggested that the ban be lifted on July 28 with the exception of automobiles, mobile phones, and home appliances, but PM Shehbaz had rejected the recommendation. After reconsidering its ruling from 21 days prior, the ECC removed the prohibition on all items. The PM opposed loosening the restrictions because his main concern was the out-of-control trade deficit, which threatened the viability of the economy. However, the administration was forced to yield under pressure from the IMF, EU, and business community.
According to the ECC, held-up shipments that arrived after June 30 and up until July 31, 2022, should be released with the payment of a premium. It was agreed that until the end of July, all automobiles, mobile phones, and household appliances entering Pakistani ports will be subject to a 100pc tariff. Other items will be charged a 35pc premium instead of the previous 15pc penalty for breaking the restriction in June. The ECC had imposed an import ban on more than 860 products and tariff lines in 33 classes or categories of goods in May. According to the trade ministry, as of the end of July, the total import of the prohibited goods has decreased by approximately 69pc, from $400m to $124m. However, the $190m in savings came from three different products: autos, phones, and household appliances.
The ECC was informed that the decision to limit the restriction to only those products that had helped restrain imports was made in response to substantial concerns expressed by the main trading partners about the embargo and in light of the ban’s impact on supply chains and the local retail industry. According to the Ministry of Finance, the ECC also approved a proposal to change the LNG Policy 2011 to exempt the new LNG terminals from the requirements for Third-Party Access (TPA). It was suggested that the country’s gas load management and economic activities were being impacted by the growing disparity between gas supply and demand.
To fulfil the nation’s rising LNG demand, it was necessary to promote and encourage foreign private investment in new LNG terminals at their own costs and risks.
This was also necessary to diversify the LNG import infrastructure. The ECC accepted the proposal to exclude the new LNG terminals and related facilities from the application of TPA regulations and permitted a revision to Article 6.2(a) of the LNG Policy 2011 taking into account the goals of encouraging investment in the LNG import terminal facilities. Qatar Energy expressed interest in purchasing the 800mmcfd LNG terminal capacity as well as 49pc of its shares, and this was relayed to the ECC.