Govt ascribes high food inflation to agriculture upsets

ISLAMABAD: The finance ministry on Monday attributed year-high food inflation to supply chain disruptions, climate change and higher prices of commodities in the international market.

The ministry said 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, led to higher food inflation

“Another factor contributing to higher inflation was the global price impact due to international commodity prices like palm oil increased 43.9 percent, soybean oil by 12.8 percent, crude oil by 16.6 percent in December 2019 over December 2018 also pushed up the domestic prices,” it said in a statement.

The finance ministry, however, said the outcome of stabilisation policies, agriculture sector interventions, rigorous monitoring at federal/provincial levels and favourable weather would bring in better results in easing out inflation and sustain the economy towards growth and productivity in the coming days. “Change of weather and better supply of potatoes, tomatoes and onions should result in smooth supply and decrease price pressure.”

The ministry said downward trajectory in crude oil in the market would 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,” it said.

The measures include provision of subsidy to Utility Stores Corporation on five essential items for which Rs7 billion has been transferred to ministry of industries and production; Rs141 billion released for low-end consumers using less than 300 units of electricity in a month; social safety net allocation doubled to Rs190 billion and Rs12 billion gas subsidy released.

Similarly, Rs5,000 quarterly tranche was paid to 4.3 million poor families in December 2019. Under Kifalat, monthly stipends of Rs2,000 per month to 4.5 million families for consumption smoothing would start from 1 February, 2020 and 1 million new beneficiaries to be added to Kifalat in the next five months with a monthly transfer of Rs2,000. General sales tax on liquefied petroleum gas was reduced to 10 percent from 17 percent.

The ministry of finance said the government devised a strategy to control and ease out the impact of inflation through a host of policy measures, which included Economic Coordination Committee’s permission for import of 0.3 million tons of wheat to decrease the local wheat price and meet the domestic requirement and zero borrowing by government from the central bank in the current fiscal year.

Government retired Rs837.2 billion (1st July-17th January 2020) compared to borrowing of Rs3.770 trillion in the same period last year; reduction in fiscal deficit; monetary tightening and demand compression by austerity; complete restriction on supplementary grants and establishment of prices monitoring cell in ministry of national food security and 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 Rs1.5 billion for public tandoors and provincial governments monitoring display of price list and quality of items in open market and Sasta Bazaars. Competition Commission of Pakistan is taking measures to control cartelisation and undue profiteering.