Federal Minister for Finance and Revenue Shaukat Tarin has announced that the wheat issue price for release to mills has been fixed at Rs. 1,950 per 40-kg to help reduce the price of wheat flour in the consumer market.
Addressing a news conference on the rising inflation and public debt on Wednesday, the Minister explained that keeping the release price at Rs. 1,475 per 40-kg was not affordable for the government since it came at the cost of a massive subsidy. With the new release price, the provincial governments will still be able to provide over Rs. 100 per 40kg in the shape of targetted tax relief to the masses, he added.
Mr. Tarin stated that the government increased the support price to Rs. 1,800 as a hedge against scarcity of domestic wheat production. He underlined that the government also intended to give targeted subsidies on wheat flour, sugar, ghee, and pulses to 40 percent of the population by “increasing income and affordability” at the best possible level.
The funds to give targeted subsidies will be processed through the Benazir Income Support Programme (BISP), he informed. In this regard, a BISP official was quoted to have said that a proposal was being reviewed to grant additional cash to almost five million people.
Speaking on the occasion, Special Assistant to the Prime Minister on Food Security Jamshed Iqbal Cheema said that Prime Minister Imran Khan agreed to lift the subsidy on wheat flour and increase the release price by more than 32 percent. The decision to fix the new release price of wheat was made in a meeting chaired by the Prime Minister last week, and the representatives of relevant provincial governments also attended the meeting, he added.
According to the Pakistan Bureau of Statistics (PBS), the average cost to purchase a 20-kg bag of wheat flour was Rs. 1,220, indicating a per-year increase of 20% in less than 12 months.
The Finance Minister argued that limited efforts were being made to control prices at the provincial level. He explained, “the previous government kept the wheat support price unchanged at Rs. 1,250 per 40-kg and as a result there was no increase in yield of the crop during the past 5 years.”
Separately, the Finance Minister explained that the public debt had increased manyfold due to restricted economic growth, IMF policies, and the COVID-19 pandemic. “The PTI government in 2018 had to go to IMF, which led to the devaluation of rupee from Rs. 104 to Rs. 168 and an increase in the discount rate to 13.25%,” explained Tarin. He also mentioned that a fraction of the debt was used to support the country’s forex reserves, and “nearly $4 billion to $5 billion foreign exchange reserves were built through loans.”
At present, Tarin remarked, Pakistan’s debt stands at Rs. 39.9 trillion against Rs. 25 trillion in 2018. Explosive interest rates of 13.25% and “increased debt servicing from Rs. 1.5 trillion to Rs. 2.9 trillion within a year” greatly impacted the public debt, he said.