Inflation to Remain in Double Digits: Government

The government, on Monday, conceded that the inflation is expected to remain in double digits in December but slightly lower than last month’s number.

The Economic Advisor’s Wing (EAW) of the Ministry of Finance, in its Monthly Economic Update & Outlook for December, noted that Pakistan’s Year-on-Year (YoY) inflation has increased in recent months, the major contributors of inflation include higher global commodity prices, electricity charges, house rent, and transportation cost. However, the government is taking administrative, relief, and policy measures to ease out the inflationary pressures in the coming months, it added.

“The price adjustments were directly and indirectly induced by the recent exceptional increase in international commodity prices and exchange rate movements,” the report noted.

It said that international oil prices have retreated somewhat from previous highs, and the government is making efforts to dampen the pass-through of high international food prices into domestic retail markets. The government aims to counter food inflation in the future by increasing agriculture productivity.

“The low base effect may contribute to keep inflation rate of December in double-digit. Although the forecast probability margins are wide, most likely, YoY inflation is expected to remain in double-digit in December but slightly less than the last month’s number,” the report said.

Consumer Price Index (CPI) during July-Nov FY22 was recorded at 9.32 percent against 8.76 percent during the same period last year. The food prices have increased globally due to the shortage of supply of commodities and high demand after the post-pandemic scenario, the report noted.

Exports of goods and services increased by around 13 percent in November compared to October and settled well above the $3 billion mark and are expected to climb further in coming months to reach a new higher level for the foreseeable future, the report said.

During July-Nov FY22, exports increased by 26.9 percent to $12.4 billion ($ 9.7 billion last year). The exports grew by 33.7 percent in November 2021 to $2.9 billion against $2.1 billion last year. On the other hand, the total imports in July-Nov FY22 increased to $33.0 billion ($19.5 billion last year), registering an almost 70 percent growth.

It said that the government’s fiscal consolidation efforts are paying off in terms of improved fiscal accounts. With prudent expenditure management and an effective revenue mobilization strategy, it is expected that the overall fiscal deficit would remain within the reasonable level.

The net federal revenue receipts climbed by 17.4 percent to Rs. 1,205 billion in July-Oct FY22, up from Rs. 1,026 billion during the same period last year. A significant rise of 36.7 percent in Federal Board of Revenue (FBR) tax and a 5.4 percent increase in non-tax collection propelled the growth in government revenues.

Total expenditures increased by 11.7 percent to Rs. 2,171 billion in July-Oct FY22, compared to Rs. 1,943 billion last year. The increase has been witnessed owing to an 8.5 percent increase in current expenditures and 55.6 percent growth in Public Sector Development Programme (PSDP) spending. The overall fiscal deficit reduced to 1.1 percent of GDP (Rs. 587 billion) in the first four months of FY22, down from 1.7 percent (Rs. 775 billion) recorded in the same period of the previous year.

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