Auto Finance Reviews – Journal


The State Bank’s decision to revise its prudential regulations governing consumer finance to curb car sales is a desperate attempt to moderate domestic demand growth and curb burgeoning imports to control the country’s deficit. current account, which widened to $ 2.3 billion in July-August from a surplus of $ 838 million a year ago. The import of CBU and CKD in the last fiscal year had increased to $ 2.142 billion from $ 1.276 billion the previous year. In the first two months of this fiscal year, imports of CBU / CKD jumped to $ 495 million from $ 160 million a year ago. The revisions may not have a drastic impact on the overall import bill – and therefore the trade deficit – but they will certainly hurt domestic car sales. With the current account set to greatly exceed the central bank’s optimistic projections of 2-3% of GDP for the current fiscal year, the bank and the government have, since last week, started to temper their monetary and fiscal stimulus measures to reduce the economy to reduce speed in order to alleviate the pressures on the precarious situation of the balance of payments.

The State Bank’s revised auto finance policy strengthens regulatory requirements for obtaining loans for cars assembled in the country over 1000 cc displacement through reduced rental terms, increased l Minimum down payment and reduced maximum debt ratios for borrowers. The new policy effectively bans the financing of imported vehicles and sets the maximum amount of outstanding auto loans at 3 million rupees at any one time. Locally assembled electric vehicles, hybrids and cars under 1,000 cc have been isolated from the changes in an effort to encourage environmentally friendly technologies and middle-income car buyers. Overseas Pakistanis with Roshan digital accounts will also not be affected by the changed regulations. Until recently, ministers had jumped for joy, citing increased car sales as a benchmark for the economy to return to recovery. Warnings from experts that the nascent economic recovery on the back of pro-cyclical economic policies would put the current account under immense pressure have been brushed aside with contempt. Recent developments, however, have proven that the criticisms of the unprecedented monetary and fiscal stimulus are correct. We still do not know how far the government will go to calm the overheating economy. But it is quite certain that it could soon run out of time if it does not act quickly to protect its debt-based foreign exchange reserves and reach an agreement with the IMF during the next review in October of its. suspended program.

Posted in Dawn, le 28 September 2021


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