Policies to check inflation will pay off in coming days: govt

Updated February 04, 2020

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Finance ministry says import of 300,000 tonnes of wheat will decrease local wheat price and meet domestic requirement. — AFP/File
Finance ministry says import of 300,000 tonnes of wheat will decrease local wheat price and meet domestic requirement. — AFP/File

ISLAMABAD: The government on Monday said it was increasing the amount of stipend and number of its beneficiaries as policies and efforts to ease out inflation will start bearing fruit in the ‘coming days’.

In a statement, the ministry of finance tried to explain the reasons behind the continuously increasing rate of inflation that hit 14.6pc in January after almost a decade and the related public criticism. It also reported how it was increasing the number of beneficiaries of the income support and other subsidies to a part of population.

Without giving a timeline, the ministry said the inflation would ease out and the economy move towards growth and productivity in the coming days as a series of factors including adverse weather conditions and disruption in supplies reverse.

“While the factors above are likely to ease the inflation, the government has taken several relief measures to protect the vulnerable from the price-hike,” the ministry said. The measures include provision of subsidy to Utility Stores Corporation on five essential items for which Rs7 billion had been transferred to the ministry of industries and production and allocation of Rs226.5bn subsidy for electricity consumers of below 300 units per month.

Amount of stipend, number of beneficiaries being increased

The ministry also noted PM’s Ehsaas programme with increased social safety net allocation of Rs190bn from 100bn, and allocation of Rs24bn gas subsidy. The ministry said the government had given Rs1,000 per family to 5.1 million families as a special transfer in August 2019.

The ministry hoped the outcome of stabilisation 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.

In the meanwhile, it said Rs5,000 quarterly tranche was also paid to 4.3m poor families in December 2019. Moreover, Kifalat monthly stipend of Rs2,000 per month started with effect from Feb 1 would cover 4.5m families, while 1m new beneficiaries would be added to Kifalat in the next five months with a monthly transfer of Rs2,000.

In addition, undergraduate scholarships to cover the cost of tuition fee and other expenses at the university for 50,000 needy students was being offered while Rs750 for boys and Rs1,000 for girls (primary school going children) quarterly stipends was being given to 3m children besides an allocation of Rs152bn for merged Fata districts.

The ministry attributed the surge in food inflation to adverse effects of pre-monsoon rains on wheat crop, disruption of supply chain of essential items due to harsh winters and thick fog, delay in harvest and arrival of crop in the market and lower production of vegetables, including tomato in Sindh. However, it hoped “the change of weather and better supply of potatoes, tomatoes and onions should result in smooth supply and decrease in 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 43.9pc, soyabean oil by 12.8pc, crude oil by 16.6pc, etc in December last year 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, it said.

The ministry claimed that “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 300,000 tonnes of wheat to decrease the local wheat price and meet the domestic requirement and zero borrowing by the government from the SBP in the current fiscal year.

It said the government also retired Rs837.2bn debt between July 1, 2019 to January 17 compared to its record borrowing of Rs3.77 trillion of the same period last year. It said the reduction in fiscal deficit, primary surplus in first half of the fiscal year, monetary tightening and demand compression by austerity, complete restriction on supplementary grants and monitoring of prices of essential items to check price hike and expansion of Sasta Bazaars would also be helpful. It claimed the Competition Commission of Pakistan was also taking effective measures to control cartelisation and undue profiteering.

Published in Dawn, February 4th, 2020