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Finance ministry says it will be slightly less than previous month’s reading
The Ministry of Finance said on Monday that the inflation rate would stay in double digits for the second consecutive month in December but it remained shy of giving a number ahead of approval of a highly inflationary mini-budget.
“The low base effect may contribute to keep inflation rate of December in double digit,” said the Ministry of Finance in its monthly economic outlook report for December.
However, for the first time, the ministry did not give a projection and only said that “inflation is expected to remain in double digit in December but slightly less than the last month’s number”.
In November, the inflation rate had soared to 11.5% due to the government’s decision to increase prices of commodities, electricity, fuel and the central bank’s reckless policy to let the rupee depreciate.
Information Minister Fawad Chaudhry said that the government would seek cabinet’s approval for mini-budget on Tuesday (today) and it would be laid before the National Assembly later.
The mini-budget is the condition of the IMF to take Pakistan’s request for $1 billion loan on January 12 to its executive board.
According to The Express Tribune’s report, about Rs360 billion worth of taxes will be imposed, which include Rs355 billion in indirect and highly inflationary general sales tax-related measures.
These have the potential to fuel inflation and keep it in double digits for a longer period, as the general sales tax is being proposed on almost every essential commodity, including the food items being sold at bakeries, packaged dairy products and infant milk.
The Ministry of Finance said that the major contributor to inflation in recent months had been “higher global commodity prices, electricity charges, house rent and transportation cost”.
“The price adjustments were directly and indirectly induced by recent exceptional increase in international commodity prices and exchange rate movements,” said the ministry.
The government had apparently removed former finance minister Dr Abdul Hafeez Shaikh on charges that he failed to contain inflation. The PTI also faced a humiliating defeat in local government elections in Khyber-Pakhtunkhwa on what the party members said was because of high inflation in the country.
Shaukat Tarin on Monday took oath of finance minister after being elected as a senator from Khyber-Pakhtunkhwa. Tarin belongs to Punjab.
The finance ministry said that it was expected that the monthly inflation rate, which had hit 13-year high level last month, “will soften in December”.
International oil prices had retreated somewhat from previous highs and the exchange rate continued to slightly depreciate but government efforts to dampen the pass-through of high international food prices into domestic retail markets continued, it added.
The ministry made rosy projections for economic growth but said that inflationary pressures and the consequent tightening of policies may dampen growth prospects.
The average Monthly Economic Indicator for the first five months of current fiscal year indicates that average economic growth during this period may be estimated at around 5%, according to the report.
It said that despite the spread of Omicron variant, there was demand for Pakistani exports by the trading partners. “But we should also not ignore the impending risks including the concerns of policymakers about the inflationary effects and the resulting policy response.”
The new variant and global inflationary pressures were the key concerns and they were making the economic outlook more difficult, said the finance ministry.
It said that after three years, the current account deficit during July-November period was recorded at $7.1 billion mainly due to import of vaccines, necessary food items to build strategic reserves and energy.
But the fiscal accounts have continued to improve, reflecting the government’s commitment to prudent expenditure management and effective revenue mobilisation strategy.
This is reflected from the fact that net federal revenue receipts climbed 17.4% to Rs1.2 trillion in the July-October period, up from Rs1.1 trillion during the same period of last year.
There was a significant rise of 36.7% in the Federal Board of Revenue’s (FBR) tax collection and 5.4% increase in non-tax collection.
Total expenditure, on the other hand, increased 11.7% to Rs2.2 trillion in July-October of current fiscal year, compared to nearly Rs2 trillion last year. The increase has been witnessed owing to 8.5% increase in current expenditure and 55.6% growth in PSDP spending.
Consequently, the overall fiscal deficit shrank to 1.1% of GDP, or Rs587 billion, in the first four months of FY22, down from 1.7%, or Rs775 billion, recorded in the same period of last year.
However, the ministry did not give the federal budget deficit figure, which is the real barometer of public finances.
tribune.com.pk
Inflation won’t subside anytime soon
The government has conceded inflationary pressure would continue for a while in the country even though the country has been on a high growth trajectory compared to the growth observed during the fiscal year 2021.
The Ministry of Finance in its monthly economic outlook for December 2021 said that Pakistan is on a higher growth trajectory, compared to growth observed in fiscal year 2021. However, there is inflationary pressure due to low base effects and surge in global commodity prices; both international food and oil prices are currently quoted at or near the upper regions of the present international commodity price cycles, and drop is expected in the coming months.
The ministry warned that, we should also not ignore the impending risks including the concerns of the policy makers about the inflationary effects as year on year inflation has increased in the recent months. The major contributors of inflation included higher global commodity prices, electricity charges, house rent and transportation cost. However, government is taking administrative, relief and policy measures to ease out the inflationary pressures in the coming months.
The exports of goods and services settled well above the US$3 billion and are expected to increase further in the coming months to reach a new higher level for the foreseeable future, whereas, the government’s fiscal consolidation efforts are paying off in terms of improved fiscal accounts and with revenue mobilisation strategy, overall fiscal deficit is expected to remain within the reasonable level.
The ministry also highlighted that the resurgence of the pandemic owing to latest variant Omicron has increased uncertainty around global economic prospects and consequently, several countries grapple with inflation well above their monetary policy targets.
It is likely that the IMF may downgrade global economic projections due to the rising uncertainty amid possible spread of Omicron variant.
The overall fiscal deficit reduced to 1.1 percent of the
GDP (Rs587 billion) in the first four months of FY2022, down from 1.7 percent (Rs775 billion) recorded in the comparable period of last year.
Similarly, the primary balance posted a surplus of Rs206 billion in Jul-Oct FY2022, as compared to Rs156 billion in the same period last year.
The government stated that despite the spread of omicron variant, the cyclical position in the main trading partners remained better but the country should also not ignore the impending risks including the concerns of the policy makers about the inflationary effects and the resulting policy response.
The trend of high frequency variables is encouraging and it is expected that the economy will achieve its growth target as in real sector, agriculture wheat crop has been cultivated on an area of 22.1 million acres (94.5 percent of target area of 23.3 million acres).
During July-November 2022, the agriculture credit disbursement recorded an increase of 3.9 percent and reached Rs488.5 billion (Rs470.1 billion in same period last year).
The farm tractors production has increased, the urea off-take during Rabi 2021-22 (October-November) was 1,088,000 tonnes, which recorded an increase of 15.0 percent over same period last year, while the DAP off take was recorded at 562,000 tonnes, which decreased by 4.1 percent over Rabi 2020-21 (Oct-Nov). The overall LSM posted a growth and 11 out of 15 sub-sectors of LSM have witnessed positive growth during Jul-Oct 2022.
The current account posted a deficit of $7.1 billion (5.3 percent of GDP) for July-November 2022 as against a surplus of $1.9 billion (1.6 percent of GDP) last year, while workers’ remittance has been recorded at $12.9 billion against $11.8 billion last year, reflecting an increase of 9.7 percent.
Portfolio Investment-Public was negative 261.5 million in July-November 2021 last year and now it was recorded at negative 79 million, whereas, total foreign investment (FDI & Portfolio Investment) has increased from $263.4 million to $455.5.
The Ministry of Finance said on Monday that the inflation rate would stay in double digits for the second consecutive month in December but it remained shy of giving a number ahead of approval of a highly inflationary mini-budget.
“The low base effect may contribute to keep inflation rate of December in double digit,” said the Ministry of Finance in its monthly economic outlook report for December.
However, for the first time, the ministry did not give a projection and only said that “inflation is expected to remain in double digit in December but slightly less than the last month’s number”.
In November, the inflation rate had soared to 11.5% due to the government’s decision to increase prices of commodities, electricity, fuel and the central bank’s reckless policy to let the rupee depreciate.
Information Minister Fawad Chaudhry said that the government would seek cabinet’s approval for mini-budget on Tuesday (today) and it would be laid before the National Assembly later.
The mini-budget is the condition of the IMF to take Pakistan’s request for $1 billion loan on January 12 to its executive board.
According to The Express Tribune’s report, about Rs360 billion worth of taxes will be imposed, which include Rs355 billion in indirect and highly inflationary general sales tax-related measures.
These have the potential to fuel inflation and keep it in double digits for a longer period, as the general sales tax is being proposed on almost every essential commodity, including the food items being sold at bakeries, packaged dairy products and infant milk.
The Ministry of Finance said that the major contributor to inflation in recent months had been “higher global commodity prices, electricity charges, house rent and transportation cost”.
“The price adjustments were directly and indirectly induced by recent exceptional increase in international commodity prices and exchange rate movements,” said the ministry.
The government had apparently removed former finance minister Dr Abdul Hafeez Shaikh on charges that he failed to contain inflation. The PTI also faced a humiliating defeat in local government elections in Khyber-Pakhtunkhwa on what the party members said was because of high inflation in the country.
Shaukat Tarin on Monday took oath of finance minister after being elected as a senator from Khyber-Pakhtunkhwa. Tarin belongs to Punjab.
The finance ministry said that it was expected that the monthly inflation rate, which had hit 13-year high level last month, “will soften in December”.
International oil prices had retreated somewhat from previous highs and the exchange rate continued to slightly depreciate but government efforts to dampen the pass-through of high international food prices into domestic retail markets continued, it added.
The ministry made rosy projections for economic growth but said that inflationary pressures and the consequent tightening of policies may dampen growth prospects.
The average Monthly Economic Indicator for the first five months of current fiscal year indicates that average economic growth during this period may be estimated at around 5%, according to the report.
It said that despite the spread of Omicron variant, there was demand for Pakistani exports by the trading partners. “But we should also not ignore the impending risks including the concerns of policymakers about the inflationary effects and the resulting policy response.”
The new variant and global inflationary pressures were the key concerns and they were making the economic outlook more difficult, said the finance ministry.
It said that after three years, the current account deficit during July-November period was recorded at $7.1 billion mainly due to import of vaccines, necessary food items to build strategic reserves and energy.
But the fiscal accounts have continued to improve, reflecting the government’s commitment to prudent expenditure management and effective revenue mobilisation strategy.
This is reflected from the fact that net federal revenue receipts climbed 17.4% to Rs1.2 trillion in the July-October period, up from Rs1.1 trillion during the same period of last year.
There was a significant rise of 36.7% in the Federal Board of Revenue’s (FBR) tax collection and 5.4% increase in non-tax collection.
Total expenditure, on the other hand, increased 11.7% to Rs2.2 trillion in July-October of current fiscal year, compared to nearly Rs2 trillion last year. The increase has been witnessed owing to 8.5% increase in current expenditure and 55.6% growth in PSDP spending.
Consequently, the overall fiscal deficit shrank to 1.1% of GDP, or Rs587 billion, in the first four months of FY22, down from 1.7%, or Rs775 billion, recorded in the same period of last year.
However, the ministry did not give the federal budget deficit figure, which is the real barometer of public finances.
Inflation to stay in double digits in Dec | The Express Tribune
Finance ministry says it will be slightly less than previous month’s reading
tribune.com.pk
Inflation won’t subside anytime soon
The government has conceded inflationary pressure would continue for a while in the country even though the country has been on a high growth trajectory compared to the growth observed during the fiscal year 2021.
The Ministry of Finance in its monthly economic outlook for December 2021 said that Pakistan is on a higher growth trajectory, compared to growth observed in fiscal year 2021. However, there is inflationary pressure due to low base effects and surge in global commodity prices; both international food and oil prices are currently quoted at or near the upper regions of the present international commodity price cycles, and drop is expected in the coming months.
The ministry warned that, we should also not ignore the impending risks including the concerns of the policy makers about the inflationary effects as year on year inflation has increased in the recent months. The major contributors of inflation included higher global commodity prices, electricity charges, house rent and transportation cost. However, government is taking administrative, relief and policy measures to ease out the inflationary pressures in the coming months.
The exports of goods and services settled well above the US$3 billion and are expected to increase further in the coming months to reach a new higher level for the foreseeable future, whereas, the government’s fiscal consolidation efforts are paying off in terms of improved fiscal accounts and with revenue mobilisation strategy, overall fiscal deficit is expected to remain within the reasonable level.
The ministry also highlighted that the resurgence of the pandemic owing to latest variant Omicron has increased uncertainty around global economic prospects and consequently, several countries grapple with inflation well above their monetary policy targets.
It is likely that the IMF may downgrade global economic projections due to the rising uncertainty amid possible spread of Omicron variant.
The overall fiscal deficit reduced to 1.1 percent of the
GDP (Rs587 billion) in the first four months of FY2022, down from 1.7 percent (Rs775 billion) recorded in the comparable period of last year.
Similarly, the primary balance posted a surplus of Rs206 billion in Jul-Oct FY2022, as compared to Rs156 billion in the same period last year.
The government stated that despite the spread of omicron variant, the cyclical position in the main trading partners remained better but the country should also not ignore the impending risks including the concerns of the policy makers about the inflationary effects and the resulting policy response.
The trend of high frequency variables is encouraging and it is expected that the economy will achieve its growth target as in real sector, agriculture wheat crop has been cultivated on an area of 22.1 million acres (94.5 percent of target area of 23.3 million acres).
During July-November 2022, the agriculture credit disbursement recorded an increase of 3.9 percent and reached Rs488.5 billion (Rs470.1 billion in same period last year).
The farm tractors production has increased, the urea off-take during Rabi 2021-22 (October-November) was 1,088,000 tonnes, which recorded an increase of 15.0 percent over same period last year, while the DAP off take was recorded at 562,000 tonnes, which decreased by 4.1 percent over Rabi 2020-21 (Oct-Nov). The overall LSM posted a growth and 11 out of 15 sub-sectors of LSM have witnessed positive growth during Jul-Oct 2022.
The current account posted a deficit of $7.1 billion (5.3 percent of GDP) for July-November 2022 as against a surplus of $1.9 billion (1.6 percent of GDP) last year, while workers’ remittance has been recorded at $12.9 billion against $11.8 billion last year, reflecting an increase of 9.7 percent.
Portfolio Investment-Public was negative 261.5 million in July-November 2021 last year and now it was recorded at negative 79 million, whereas, total foreign investment (FDI & Portfolio Investment) has increased from $263.4 million to $455.5.
BR-ePaper | Dec 28, 2021 | Page Front Page 1
epaper.brecorder.com
