Ministry of Finance has stated that the outcome of stabilization policies, agriculture sector interventions, rigorous monitoring at federal/provincial levels and favorable weather will ease out inflation and sustain the economy towards growth and productivity in the coming days.
In an official statement, the Ministry said:
Adverse effects of pre-monsoon rains on wheat crop, disruption of supply chain of essential items due to harsh winters and thick fog, delay in harvest and arrival of crop in the market and lower production of vegetables, including tomato in Sindh, led to a higher food inflation but the change of weather and better supply of potatoes, tomatoes and onions should result in smooth supply and decrease price pressure.
Another factor contributing to higher inflation was the global price impact due to international commodity prices. Palm oil price increased by 43.9%, Soybean oil 12.8%, Crude oil 16.6%, etc in December 2019 compared to December 2018 which contributed to higher inflation. The downward trajectory in crude oil in the market will result in a downward pattern in domestic prices in the coming months.
While the factors above are likely to ease inflation, the government has also taken several relief measures to protect the vulnerable from the price-hikes.
According to the statement, these measures include:
- Provision of Rs. 7 billion subsidies to Utility Stores Corporation on 5 essential items.
- Rs. 226.5 billion allocated in the budget.
- Rs. 141 billion already released so far, for low-end consumers using less than 300 units of electricity in a month;
- PM’s Ehsaas program with doubled social safety net allocation of Rs. 190 billion from Rs. 100 billion and Rs. 24 billion allocated for the gas subsidy,
- Rs. 5,000 quarterly tranche paid to 4.3 million poor families in December 2019; Under Kifalat, monthly stipends of Rs. 2,000 per month to 4.5 million families for starting from 1st February 2020;
- 1 million new beneficiaries to be added to Kifalat in the next five months with a monthly transfer of Rs. 2,000; Undergraduate scholarships to cover the cost of tuition fee and other expenses at the university for 50,000 needy students;
- Rs. 750 quarterly stipends for boys and Rs. 1,000 for girls for primary school-going children, three million children covered.
- Record allocation Rs. 152 billion for merged FATA districts; and reduced GST on LPG to 10% from 17%.
The Ministry of Finance said the government had also devised a strategy to control and ease out the impact of inflation through a host of policy measures which included ECC permission for import of 0.3 million tons of wheat to decrease the local wheat price and meet the domestic requirement.
Zero borrowings by Govt from SBP
According to the released statement, the government did not borrow money from SBP in the current FY. Government retired Rs. 837.2 billion (1st July-17th January 2020) as compared to the borrowing of Rs. 3770.5 billion the same period of last year.
Additional improvements which will help ease inflation include:
- Reduction in the fiscal deficit, primary surplus H1FY 20
- Monetary tightening and demand compression by austerity
- Complete restriction on supplementary grants
- Prices monitoring Cell in the Ministry of National Food Security & Research to check price hikes of essential food items; network of Sasta Bazaars and Utility Store outlets is being expanded for the provision of essential items.
- Cheaper Roti provided a subsidy of Rs. 1.5 billion for public tandoors; provincial governments monitoring the display of price list and quality of items in the open market and Sasta Bazaars.
- Effective measures being taken by the CCP to control Cartelization and undue Profiteering.