ISLAMABAD: While advising the masses “Aap na Ghabrana Nahe” or don’t panic, Prime Minister’s Adviser on Finance Shaukat Tarin conceded on Friday that the low-income groups living in urban areas were facing challenges in the wake of rising inflationary pressures. He, however, claimed the unprecedented inflation would be offset within four months with reducing global inflationary trend alongside Pakistan's rising exports and remittances, which would help reduce the current account gap. Shaukat Tarin also promised that the FBR’s valuation rates for immovable properties for 40 major cities would be rationalized to make them realistic.
It was an interesting coincidence that Prime Minister’s Adviser Shaukat Tarin first advised the masses by using the wording that there was no need to worry (Aap Na Ghabrana Nahe) and later on PM’s Adviser on Commerce Abdul Razak Dawood, who joined the press briefing after 10 minutes, used the same phrase “Aap Na Ghabrana Nahe”. At this, Shaukat Tarin promptly stated that he had also used the same words, which sent everybody in the audience laughing.
Shaukat Tarin made efforts to justify the rising inflation mainly because of import-induced inflation and argued that the import bill surged by $1.4 billion to $7.7 billion in November 2021, against $6.3 billion in October 2021, mainly due to increased prices of POL products by $508 million, raw material jumping up by $252 million, machinery bill increasing by $750 million, import of vaccine bill exceeding $400 million and prices of food jumping up by $134 million. The imported vaccines are fully funded from the WB and ADB, he added. However, he said that the government would slap a ban on non-essential imported items such as the import of cars in the shape of Completely Built Units (CBU), which would be curtailed. On other luxury items, he said that the Regulatory Duty (RD) would be jacked up to discourage rising imports. The trade deficit has increased to $20 bn from over $9 bn.
To a query regarding increasing imports of refined POL products, Shaukat Tarin replied that the government would incentivize the refineries to run on full utilization capacity. Furthermore, by refining imported crude in place of expensive imported refined POL products, the inflation would further drop. He said the government was going to collect an additional Rs500 to Rs600 billion as increased revenues, so the IMF would not object to provision of targeted subsidies to help the poorest segments of the society.
The PM’s Adviser on Finance said he was not happy with the depreciation of the exchange rate. He was of the view the Real Effective Exchange Rate (REER) was hovering at Rs167 or Rs168 against the US dollar but the rupee was sliding on daily basis mainly because of speculators. He said that some banks were also involved in jacking up forward booking for earning lofty profits on depreciation of exchange rate, and he had informed the Governor State Bank of Pakistan about it alongside data. He warned that those involved in earning lofty profits would have to bear losses by end of the day. He said that the Tax Supplementary Bill (mini budget) for abolishing the GST exemptions would be laid down before the parliament after seven to 10 days as it required approval from the ECC and cabinet before submitting to parliament.
Shaukat Tarin kick-started his press briefing by saying that import-induced inflation was pushing up the price hike as the import bill of energy, including POL, gas, furnace oil, palm oil and pulses, were fueling inflation in the country. He said that four different news in the recent past caused ‘anxiety’. First of all, the CPI-based inflation peaked at 11.5 percent for November 2021. The second was related to increased import bill that had jumped up to $7.7 billion in November 2021 as compared to $6.3 billion in October 2021. The POL prices in the international market had come down from $86 per barrel to $68 per barrel and it was hoped that prices of other imported items, including palm oil and others, would also witness declining trends after which the prices in our domestic market would also be reduced. The inflation would be further offset by rising Pakistan exports and remittances, which will reduce the current account gap.
He said that the economy had started picking up growth and economic indicators were demonstrating a positive trend as the FBR’s revenue achieved 36 percent growth while Income Tax collection went up by 32 percent. He said that India’s trade deficit was also impacted and it went up by $10 billion but there was no impact on their price hike. When asked about the reasons for different impacts on inflationary pressures, he said that Pakistan had to undergo structural adjustments as the prices of electricity and gas had increased manifold, which were not passed on in the last few years and the upward adjustment of their rates also fueled inflation in Pakistan.
Tarin said that it was a commitment made with the IMF in March 2021 for getting an additional $500 million before he joined the government and he was tasked to rectify those mistakes that he did not commit. When asked why the government did not penalise those who had made wrong commitments with the IMF, he said that he did not believe in witch-hunting as the capacity payment was going to cross Rs1,000 billion but he did not hold the last PMLN government responsible. He said it was agreed with the IMF that GST and Income Tax tax exemptions to the tune of Rs700 billion would be removed, however, he convinced the IMF to slash down the exemptions to the tune of Rs300 to Rs350 billion. He said the IMF was of the view that Pakistan’s taxation system possessed distortions, so policy actions were required to remove those in the shape of exemptions.
The Adviser to PM on Commerce, Abdul Razak Dawood, said that the import of raw material stood at $9.8 billion in the first five months of the current fiscal year as import of iron and steel stood at $2.5 billion, chemicals $1.9 billion, plastic $1.2 billion, machinery $700 million and raw cotton $700 million.