‘Media reports surge in inflation but does not tell causes behind it’
ISLAMABAD: Ministry of Finance has said that the government’s macroeconomic adjustment and demand management policies for stabilisation have started making an impact as visible in the moderate growth of 3.3 % in the FY2019.
While The Finance Division pointed out that the media reports while referring to surge in inflation but did not take into consideration the major causes behindthis rise and instead stated the figures whereas major reasons for the rise in inflation are sustained pressures on twin deficits which induced the government to adjust administered prices upwards and also impose regulatory duties on imported items, supply constraints of certain food items and imposition of FED on cigarettes and the impact of rise in fuel prices and exchange rate depreciations.
As well as introduction of a host of measures to bring down inflation, jack up economic activities, strengthening of social security net, increase in employment opportunities and containment of fiscal and trade deficits, said a statement issued by Ministry of Finance here on Monday.
The result of what has been achieved so far needs to be seen and contextualised in the backdrop of a very difficult situation of the economy inherited by the government and how the measures taken by the government during the last one year have not only effectively checked the economic slide but turn the wheel in various sectors of the economy to ensure their long-term fruits for businesses and the common man.
In a detailed statement, the Finance Division has rejected the news reports published on the basis of a news article in an online international newspaper and claiming that the “Voters, traders feeling pain of the government’s economic plan” due to what the report suggests as rising inflation and other reasons. The Finance Division has maintained that at the very outset, it is important to mention that when the present government assumed the office, the economy was facing multiple challenges relating to fiscal, external and real sector of the economy.
The Finance Division pointed out that the media reports while referring to increase in prices did not take into consideration the major causes behind this rise and instead stated the figures whereas major reasons for the rise in inflation are sustained pressures on twin deficits which induced the government to adjust administered prices upwards and also impose regulatory duties on imported items, supply constraints of certain food items and imposition of FED on cigarettes and the impact of rise in fuel prices and exchange rate depreciations.
The Finance Division has further stated that the rise in inflation was mainly due to delay in policy adjustments required during FY2018 as the present government had to make difficult decisions of upward adjustment in overdue gas and electricity prices, market-based exchange rate adjustments, increase in interest rates etc. to correct the macroeconomic imbalances.
The Finance Division further clarified that the government was making all efforts to control inflation by ensuring smooth supply of commodities, checking undue profiteering and hoarding and vigilant monitoring of prices both at federal and provincial level.
Explaining the measures to control inflationary pressures on the economy, the Finance Division said the government had discontinued borrowing from the State Bank of Pakistan which had an inflationary impact, and switched to commercial banks for borrowing which was less inflationary in nature.
The government is also committed to imposing the burden of adjustments in energy prices on those who can afford rather than the poor segments of the society. A subsidy of Rs226.5 billion had been allocated in the budget for customers who use less than 300 units of electricity in a month (comprises 75% of total electricity consumers).
The Finance Division also referred to the ECC of the Cabinet’s decision to provide relief to the ‘Roti Tandoors’ for provision of cheap roti to the common man by giving the subsidy of Rs1.5 billion.
Under Poverty Alleviation Division, the government has allocated an additional amount of Rs80 billion in the country’s social protection spending for 2019-20. The important initiatives include ‘Naya Pakistan Housing Programme’ which is envisaged to construct 5 million homes over the next five years. With its strong backward linkages, development of housing sector will also lead to significant increase in growth of at least 40 different industries.
Similarly, ‘Kamyab Jawan Programme’ launched recently had two tiers programme whereby tier 1 ranged from 0.1 million to 0.5 million while tier 2 ranged from 0.5 million to 5.0 million.
Loans for tier 1 made available at a subsidized rate of 6% while for tier 2 rate is 8%. 110,000 loans will be disbursed under tier 1 and 29,000 loans will be disbursed under tier 2 over a 5-year period with subsidy of Rs 15 billion.
The Finance Division also reminded that the government had allocated Rs5 billion for Prime Minister’s Youth skill Development in the budget 2019-20 while the government had set a target to create 100,000 jobs in IT in 2019 with the PSDP earmarked for ICT sector for 2019-20 at Rs.11,140 million, showing an increase of 52.6 percent over the corresponding period of last year.
The Finance Division also said that the 10 Billion Tree Tsunami would create a total of 2 million jobs over the life of the project. Similarly, during calendar year 2018, 382,439 people were registered for overseas employment while from Jan-August 2019, 373,225 Pakistanis were registered by Bureau of Emigration and Overseas Employment for employment as compared to 244,504 emigrants during the corresponding period last year.
Pakistan follows liberal investment regime for investors’ confidence and conducive environment to attract local and foreign investment. During September FY 2020, the FDI recorded at $385.3 million showing an increase of 75.6 percent as against $182.1 million during the same month last year.
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