Surging imports that defy reason

The surge in imports in the past few months in the absence of any justifiable reasons has caused reasons to worry. This scenario has become common -- at least once every year, if not more. In the current fiscal, this has happened twice. Many think this is not only abnormal but also an outcome of well-orchestrated scheming. One clear indicator that makes one suspicious is that the alleged imports neither match demands of local market nor of the industrial sector. This was the case with the sudden increase in 'import' of capital machinery a couple of years ago. Ground reality at that time did not suggest that imports actually took place or if at all, not in such huge volumes. Presently, there is a strong feeling that in the name of import of capital machinery and intermediate products in astonishingly large volumes, capital flight is back to its merry ride. Besides the additional burden of import payments arising from the illegal practice, it is also responsible to discourage investment at home.

Call it money laundering or capital flight, it is alleged that anything from $8.0 to $9.0 billion flies away from the country every year, and that 80 per cent of this is done through manipulation of invoices. Although the issue has raised serious alarm for quite a while, no actions have been reported so far. The National Board of Revenue (NBR) and the central bank are obviously the agencies on which the onus is more than on any other state bodies. Understandably, all it takes is close coordination between the two agencies, preferably by means of jointly tracking suspicious imports - from the stage of opening of letters of credit to clearance of goods.

 Export earnings and remittance inflows grew 6.0 per cent and 17.7 per cent respectively in the first ten months of the current fiscal year, but they were far too inadequate to counteract the current account imbalance. In July-March, the overall current account balance was $7.08 billion in the negative, while the balance of payments deficit was $1.4 billion, the lowest since 2010-11. The likelihood of pressure on forex reserves will be high in the near term. Think tank Centre for Policy Dialogue (CPD) while suggesting careful monitoring of imports, warned that the likelihood of pressure on reserves will be high in the near term. In this context, CPD noted that capital flight is common mostly prior to election time.

How much money gets laundered every year through various illegal channels is not known to the central bank. Published reports of international agencies are taken to be source. An inter-agency taskforce has been restructured recently for gearing up efforts to chalk out possible measures in this regard. It is not known how the taskforce is planning to go about.