By Muhammad Soban Islamabad, June 08, (INP-WealthPK): The State Bank of Pakistan (SBP) has decided to take concrete steps to reduce the current account and fiscal deficits by narrowing the gap between imports and exports, WealthPK reports. Due to the rapid fall in foreign exchange reserves, the SBP is changing the mechanism to restrict imports. The economy of the country is under pressure as both the current account and fiscal deficits are on the rise. The current account deficit has reached $13.8 billion during the first 10 months of the current fiscal year, according to the statistics of SBP. The increase in the current account deficit has put pressure on the currency. The Pakistani rupee is losing its value and the exchange rate has reached a record high, crossing the 200 benchmarks. Federal Minister for Finance Miftah Ismail has shown concerns that the current account deficit could reach $17 billion-$18 billion by the end of the current fiscal. Bringing the deficit down to $10 billion could put a heavy strain on the economy, but the government has the only choice to slow it down to avoid default. Keeping in view the widening gap between imports and exports, the SBP has introduced a mechanism for obtaining prior approval from it for the import of a number of goods to facilitate the issuance, enhancement, modification, or registration of a letter of credit, the registration of the contract, the granting of the advance payment and the authorisation of open account transactions. The SBP has also reduced auto-financing tenure for the consumer. It has amended the Prudential Regulations for Consumer Financing (PRCF) to deflate the import bill. “The maximum tenure of auto-finance facility is reduced from five years to three years for vehicles above 1,000cc engine displacement and from seven years to five years for vehicles up to 1,000cc engine displacement,” according to the amended regulations. However, manufacturers have shown concerns over the new mechanism. They describe it as a major risk for the automobile industry that can lead to closure of all major original equipment production companies (OEMs). Abdul Waheed Khan, a senior member of the Pakistan Automobile Manufacturers Association (PAMA), has requested through a letter the acting governor of SBP, Murtaza Syed, for timely approval of the import of completely knocked down vehicles. He fears that a reduction in the tenure of auto-financing and the change in the import mechanism will negatively affect the automobile sector. “Although these steps by the SBP can affect Pakistan’s automobile sector and other industries, it is need of the hour to reduce the import bill and stabilise the national economy,” an expert told WealthPK.