What’s the plan for the automobile sector? 🚗 I Macro Pakistani Bite # 63
What’s the plan for the automobile sector? 🚗
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Good Evening!
Our government is often accused of having a myopic vision of development, touting a new plan one day, and then being forced to take a dramatic U-turn the next. Policies regarding the automobile sector over the past few months are a good example of that.
First came the budget in June which promised relief to all those considering buying a car, with federal excise duties and other taxes being reduced, leading to a dip in car prices for most sizes and models. Additional customs duty was also reduced for imported cars and car parts, with the relief being extended to all cars—not just the budget variety under 1000cc.
Unsurprisingly then, the average monthly imports of fully-assembled (CBU) cars rose by 40% in July-August compared to the same period last year. At the same time, imports of CKD cars (kits of locally assembled cars) rose by 37% for the same timeframe. Overall, for this period the import of motor vehicles was worth USD 495m compared to USD 160m last year. Surely this is what the government had been expecting, right? Wrong.
After realising that this was adding further to Pakistan’s already-growing current account deficit, the State Bank stepped in yesterday and announced steps to reduce the financing limit and period for car purchases, particularly for imported vehicles.
Consistency in policy is essential for consumers and as well as manufacturers. Unfortunately, in Pakistan, inconsistency is perhaps the only consistent theme in policymaking.
Featured Article
The Case of Thar Coal for Pakistan - Macro Pakistani — macropakistani.com
With depleted gas reserves and a rising current account deficit, should Pakistan focus more on local coal? By Syed Abul Fazal Rizvi
WEEKLY DATA WATCH
KSE-100 fell this week, primarily due to an increase in SBP’s benchmark interest rate. PKR depreciated further this week, due to a rising import bill. Local gold prices rose slightly again this week, as the depreciating rupee attracted investors towards the commodity.
The annual change in Sensitive Price Index fell to 13.88% vs. 14.33% last week. The poorest of the country (Q1) continue to bear the brunt of increased prices, with a change of 16.25% vs. 13.57% for Q5. On a weekly basis, prices fell for all quintiles by 0.07%.
Increase in prices of Tomatoes (+14.21%), Chicken (+0.13%) and Tea (+1.73%) contributed to weekly inflation. A fall in the price of Wheat (-1.60%) and Onions (-4.69%) helped moderate inflation this week.
What Else We’re Reading (Local)
Tractor prices in Pakistan have skyrocketed, and the Competition Commission of Pakistan thinks collusion between two tractor manufacturers may be behind the price hike. (Profit)
The Thar coal project has caused water and land insecurity in the region, according to a new research study. (The News International)
What Else We’re Reading (International)
An independent group of Turkish academics are facing a criminal probe for publishing inflation data showing that prices were rising twice as fast as the government claimed. (FT)
Evergrande, a Chinese real-estate developer, is in serious financial trouble. If not resolved, it would be the largest debt default by a company in Asia. (WSJ)
About Us Macro Pakistani is a data driven research platform that aims to provide a basic understanding of Pakistan’s economy. If you have an interest in contemporary news but are currently overburdened with sensationalism and specialized vocabulary, we are the platform for you.
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