No chance of reduction in inflation for another three months: Tarin

ISLAMABAD: Federal Minister for Finance Shaukat Tarin said on Wednesday said no decline in the price-hike for the next three months.

Shaukat Tarin in a news conference here at the Pak-China Centre said that the prices have swelled all over the globe due to the coronavirus pandemic but Pakistan didn't let its industries stop working. "The prices hiked up to 90 percent in the international market. Trade deficit increased due to the rise in oil prices while the Afghan crisis weighed down Pakistan's currency," Tarin said.

He said the current account deficit would recede in the remaining months of the current fiscal year because the government had procured vaccines and there were no more requirements for importing wheat and sugar. The government had imported wheat and sugar to the tune of $1 billion, he added.

He hoped that the exports target of $31 billion and IT exports would fetch $3.5 billion during the current fiscal year. The remittances, he said, were going up by 11 percent so far against the 29 percent growth achieved in the last fiscal year.

The government, he said, is considering innovative ideas for providing relief to urban middle and lower-middle-income earners such as the salaried class. When asked about the fiscal space required for providing relief to urban consumers and reminded that despite making an announcement to reduce taxes and duty on palm oil, the government could not implement the decision because of stiff resistance extended by the IMF, the minister replied that there were some innovative proposals under consideration that would be firmed up soon.

He said that the government would not backtrack from implementing the IMF programme and hoped that the State Bank of Pakistan (SBP) Amendment Bill 2021 would be passed by the Senate before the February 2 deadline.

"Yes, we made a request to the IMF for extending the meeting of Executive Board from January 28 to February 2, 2022, as the SBP Amendment Bill could not be passed by the Senate. We are now hopeful that it will be done before the envisaged deadline," Federal Minister for Finance Shaukat Tarin.

He also said that the government was considering to kick-start barter trade with Afghanistan, keeping in view its pressing requirements. The government took measures to allow trade with Afghanistan in rupee and now more items would be permitted to meet their requirements.

With regard to the upcoming visit of China, he said that Pakistan was going to request China to relocate export-oriented industries in Pakistan because without increasing exports, the trade gap between imports and exports could not be minimised.

The minister said the State Bank of Pakistan (SBP) had revised downward its GDP growth projection from 5.5 percent to 4.5 percent but he still believed that the economy might grow to the level of 5 percent for the current fiscal year. He said that the GDP growth touched 5.37 percent for the last fiscal year on the basis of the previous base year from the provisional growth figure of 3.94 percent, which no one was expecting. He hoped that the government would take corrective measures that would help bring down the current account deficit in the second half (Jan-June) period of 2021-22. The current account deficit stood at over $9.1 billion in the first six months (July-Dec) period of the current fiscal year.

When asked about the latest Transparency International (TI) report on Pakistan where the ranking of the country slided on the corruption-related index, the minister replied that the Economist Intelligence Unit downgraded ranking related to corruption and the rule of law. The details are not yet made public but the government would contest when the details would be made public, he added.

To another question, he replied that PM Imran Khan’s wealth and assets did not increase because of any corruption. When a reporter inquired then how PM’s Income Tax payment increased from Rs0.2 million to Rs9.8 million in the Tax Year 2019, Tarin said that it indicated that his earning increased to Rs35 million but there was no increase of income in billions. He argued that Imran Khan proved himself ‘Sadiq and Ameen’ before the Supreme Court of Pakistan and if someone had doubts, he could raise questions because the PM might have sold his assets.

He also conceded that the government did not have a solution to import-induced inflation in the wake of rising POL and commodities prices in the international market. The international market witnessed supercycles of prices related to commodities with prices of palm oil and POL doubling, he maintained.

To another query regarding the SBP’s regulations for instructing the commercial banks on provision of default for providing loans to the government, the minister said that this issue was related to implementing the International Financial Reporting Standard IFRS-9 as the government’s risks were different and a mechanism would be devised to place different mechanism with the central bank.

Finance Minister Shaukat Tarin said that the government faced four major crises during the last three-and-a-half-year rule. First, the current account deficit stood at $20 billion while the foreign currency reserves had depleted and stood at $7.1 billion in 2017-18. The government had to finally approach the IMF under tough conditions despite getting financial assistance from friendly countries because the financing gap stood at $28 to $30 billion.

He said that the COVID-19 pandemic became the second biggest crisis for the government and it was so acute it was felt such a crisis occurred once in a century. Thirdly, the commodities and POL prices witnessed record hikes mainly because the COVID-19 disrupted the supply chains so inflation got elevated. Fourthly, the Afghanistan crisis created a difficult situation as it caused $20 million per day smuggling of dollars into Afghanistan. He said that without promoting savings and investment in the percentage of GDP, Pakistan could not achieve higher and sustained growth. He said that the population growth needed to be curtailed.