‘Inflation pressure increases as international oil prices significantly higher’

ISLAMABAD: Inflationary pressure is increasing as prices of palm, soybean and crude oil, and tea have gone significantly up in the international market, the ministry of finance said on Thursday.

In a monthly economic report, the ministry of finance said consumer price index- (CPI) based inflation increased by 11.1 percent on a year-on-year basis in April 2021 as compared to an increase of 8.5 percent in April 2020, mainly due to an increase in prices of food items and clothing and footwear.

In the international market prices of palm oil and soybean oil prices have increased during last year.

Palm oil prices have increased from $609/metric ton to $1,075/metric ton in April 2021, showing an increase of 76.5 percent. Similarly, soybean oil prices have increased from $680/metric ton to $1,202/metric ton, showing an increase of 76.8 percent. Crude Oil prices have increased from $23.3/barrel to $64.8/barrel, showing an increase of 168 percent. Prices of tea in the international market have increased from $2,350/metric ton to $2,640/metric ton, showing an increase of 12.3 percent.

Inflation accelerated from 9.1 percent in March 2021 to 11.1 percent in April 2021. Nearly half of this increase in inflation was due to base effects and the remaining part to new price impulses. New price impulses mainly came from recent strong increases in international food and oil prices, following the observed strong recovery of the world economy. In May 2021, it is expected that the base effect will be partly reversed.

The finance ministry said timely policy measures resulted in 3.94 percent growth in FY2021, higher than the target after more than 15 years.

“This growth indicates that economic recovery has not only started but based on the major macroeconomic indicators, Pakistan is on the path of sustainable growth. The confidence of investors has been restored due to pro-business policies and major structural imbalances are in check.”

The government is taking all possible measures to bring price stability hence the pace of inflation has been slowed down.

The ministry of finance said there is a high risk related to the third wave of the pandemic. However, it has taken appropriate measures to mitigate it. The V-shaped economic recovery after a pandemic is visible due to appropriate and timely interventions by the government.

The agriculture sector grew 2.8 percent during FY2021. Crops have witnessed a growth of 2.5 percent during FY2021 because of significant growth of 4.7 percent in important crops on the basis of 27.3 million tons production of wheat, 8.5 million tons of maize, 8.4 million tons of rice, and 81 million tons of sugarcane showing growth of 8.1, 7.4, 13.6 and 22 percent, respectively. However, cotton production dropped by 22.8 percent (7.1 million bales) as compared to last year. Other crops recorded growth of 1.4 percent mainly because of an increase in production of oil seeds and green fodder while the Livestock sector has shown a growth of 3.1percent. The outlook of agriculture sector is encouraging on the basis of an uptick in inputs utilization.

The fiscal deficit during July-March was contained at 3.5 percent of GDP against 4.1 percent of GDP in the comparable period of FY2020. Similarly, the primary balance posted a surplus of Rs451.8 billion (0.9 percent of GDP) during July-March FY2021 against the surplus of Rs193.5 billion (0.5 percent of GDP) in the same period of FY2020

On account of 29 percent growth in workers’ remittances and 6.5 percent growth in exports, the current account posted a surplus of $773 million (0.3 percent of GDP) for July-April FY2021. Exports on fob were recorded $2.3 billion in April 2021 ($1.4 billion last year) thus posting a growth of 61.3 percent year-on-year.