Finance Minister Shaukat Tarin, in a media briefing on Wednesday, enlightened the nation about the incumbent government’s economic performance. He reminded everyone that the PTI government inherited a balance of payment crisis from the previous government which forced the governing party to seek the International Monetary Fund’s bailout package.
It was a Joint Press Conference where Minister of State for Information and Broadcasting Farukh Habib, and Special Advisor to Prime Minister Jamshed Dasti also briefly talked about their relevant subjects.
The new government decided to enforce a free-floating exchange rate regime and increase the discount rate. Consequently, the exchange rate depreciated sharply and inflation soared. To top it all, the COVID-19 pandemic led to further deterioration of the already fragile economy. Global supply chains were disrupted and production fell, which contributed heavily to the already increasing inflation.
Inflation has been a key challenge for the Imran Khan-led PTI government and remains a potent threat to their re-election bid. “The CPI (Consumer Price Index) has decreased from 9.3% to 8.4% over the course of the past two years”, Tarin told the media.
He further compared the levels of food inflation in rural and urban areas in July 2020 and 2021. He elaborated that food inflation in urban areas had decreased from 15% to 10% over the past year, while it had decreased to 9.1% from 17.8% in rural areas.
The government plans to give food subsidies on wheat, oil, sugar, and pulses to 12.5 million poor households. This implies that 40 to 42% of the population will receive direct cash subsidies to shield them from their economic vulnerabilities.
Sugar prices have consistently increased in the global market, increasing from $240 per ton to $430 per metric ton. Moreover, palm oil prices have increased from $760 per metric tonne to $1136 per metric tonne.
In a major relief for the populace, the government will ensure a reduction of 45 to 50 rupees and will pay this difference out of its own finances to make essential food items cheaper for the people. In addition to unveiling these plans, Tarin told that the government has instructed the Competition Commission to take strict action against those responsible for the cartelization of ghee.
Responding to the recent criticism on the increase in fuel prices, the Finance Minister told the reporters that the price of crude oil has increased in the global market by 58% over the past three years. Recently, the government increased the price of petrol by 5 rupees, against OGRA’s recommendation of approximately 1 rupee.
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He appealed to not overlook the fact that OGRA had recommended increasing the price of diesel by 10 rupees which the government has increased by only 5 rupees. On this point, SAPM on food security claimed that Pakistan was the least expensive country in the region because petrol prices were the lowest in our country.
It needs to be kept in mind that SAPM on food security mentioned the prices in other countries in USD-PKR parity i.e., after converting the other currencies in Pakistani rupees. It is worth noting that the Pakistani rupee is the worst-performing currency in the region at this point in time.
“PTI government is in the process of re-establishing the Price Control Committees at the local level to keep prices of goods and commodities in check”, Tarin said. The Magistracy System – as it is called – was discontinued during President Musharraf’s regime.
Commenting on a question by a reporter, Tarin said that the revenues of the government were increasing by 45% – 24% more than the target. This points to high economic growth, whereas Asian Development Bank’s outlook report has predicted that Pakistan will grow by 4% in the current fiscal year and inflation will touch 7.5% – the highest in the region.
The ADB reported that the 4% growth rate was contingent on the resumption of structural reforms later in the year in an ongoing program under the International Monetary Fund (IMF) Extended Fund Facility.