Stabilization policies to produce better results: Finance Ministry

Islamabad: Ministry of Finance said Monday the outcome of stabilization policies, agriculture sector interventions, rigorous monitoring at federal and provincial levels and favourable weather will bring in better results in easing out inflation and sustain the economy towards growth and productivity in the coming days.

According to a press release issued by the Ministry of Finance on Monday, adverse effects of pre-monsoon rains on wheat crop, disruption of supply chain of essential items due to harshwinters, delay in harvest and arrival of crop in the market and lower production of vegetables led to 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.

The Finance Division noted that another factor contributing to higher inflation was the global price impact due to international commodity prices like Palm oil increased by 43.9%, Soybean oil by 12.8%, Crude oil by 16.6%, etc in December 2019 over December 2018 also pushed up the domestic prices. Downward trajectory in crude oil in the market will result in downward pattern in domestic prices in coming months.

While the factors above are likely to ease the inflation, the government has also taken several relief measures to protect the vulnerable from the price-hike. These measures include provision of subsidy to Utility Stores Corporation on 05 essential items for which Rs. 7 billion has been transferred to Ministry of Industries and Production; 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.190bn from 100bn; out of Rs. 24 billion allocated for gas subsidy, Rs. 12 billion have so far been released; and Rs. 1000 per family given to 5.1 million families as a special transfer in August, 2019.

Similarly, Rs. 5,000 quarterly tranche was 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 consumption smoothing 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 for boys and Rs. 1,000 for girls quarterly stipends to primary school going children three million children covered; record allocation Rs.152 bn 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 borrowing by Govt from SBP in Current FY. Government retired Rs. 837.2 billion (1st July-17th January 2020) compared to borrowing of Rs. 3770.5 billion same period last year; Reduction in fiscal deficit, primary surplus H1FY 20; monetary tightening and demand compression by austerity; complete restriction on supplementary grants; prices monitoring Cell in 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 provision of essential items; cheaper Roti provided with subsidy of Rs.1.5 bn for public tandoors; provincial governments monitoring display of price list and quality of items in open market and Sasta Bazaars; and 10) effective measures being taken by the CCP to control Cartelization and undue Profiteering.