ISLAMABAD: Adviser to the Prime Minister on Finance Shaukat Tarin has expressed the hope that the import bill will taper off following a decline in oil prices in the international market and it would have a positive impact on inflation and the current account deficit.
Addressing a press conference along with Adviser on Commerce, Razzak Dawood, Tarin said that only growth is permanent and everything else is secondary and what is more important is that fundamentals of the economy are strong and moving in the right direction with a growth in revenue of 35 percent, higher use of energy, and substantial increase in agri output.
Tarin said that he convened the press briefing to explain the situation that led to anxiety in the market during the last few days and stated that this happened after 11.5 percent inflation, $7.7 billion imports bill, and increase in discount rate to 8.75 in the month of November.
He said that the market reacted to treasury bill at 10.75 percent as consumer rate is higher than this besides the advisory by the State Bank of Pakistan (SBP) that monetary policy committee (MPC) meeting may now be held after one and a half months instead of two months.
The adviser said that increase in import bill was primarily because of increase in the prices of commodities in the global market and consequently, there was inflation in the country. As a result, he said the low-income and middle-income groups in the urban areas have been badly affected and the government is taking measures to protect them through targeted subsidy.
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The adviser said how could there be certainty in the market when inflation is increasing, rupee is depreciating and discount rate was being raised.
"Stability in inflation would lead to stability in exchange rate and this is linked with the import bill," he said.
As soon as import would decrease, inflation would also come down and there would be certainty in the market.
He said that imports and inflation are interlinked because increase in the prices of commodities in the global market has an effect on the import bill and inflation.
He said that energy bill, industrial raw material, and vaccines have contributed over $1.3 billion increase in the import bill during the month of November.
Imports of four items petrol, coal, edible oil, and vaccines led to higher import bill and this was due to prices and not because of increase in their volumes.
The price of petrol increased by 72 percent, while increase in volume was 11 percent.
Crude petroleum products’ prices have increased by 86 percent and quantity only by five percent and same was in Soybean oil and pulses, he added.
The adviser said he was seeing pushback in energy prices and this would lessen pressure on external account as a result of decline in oil prices to $68 per barrel from $87 per barrel in the international market and it would also have an impact on inflation as well.
Replying to questions, the adviser also disclosed that the decision has been taken to impose a ban on import of CBU vehicles besides other measures to deal with the challenge of current account deficit.
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Tarin explained what led to anxiety in the market and stated that he was not happy over depreciation of rupee as real effective exchange rate was not more than Rs166-167 and anything higher than this was speculations.
He further stated that he has also shared some figures of banks foreign exchange profit with the governor State Bank of Pakistan and he was confident that he would take action.
The adviser also forewarned the banks that a major intervention, at any time, would cause them losses.
He said that there was a 32 percent rise in income tax collection.
He said that by the end of fiscal year, the revenue collection would be 600 million more than projected in the budget.
He said that the inflation target has not yet been revised and it was the prerogative of the SBP, however, so far it is projected between 8.5 to 9.5 percent.
The adviser on commerce stated that there was no need for showing fear or anxiety. He added that next month petroleum products import bill would be relatively less due to decline in oil prices in the international market.
He also explained what led to higher import bill in the month of November and stated that energy was leading at top followed by vaccine, raw material, and import machinery.
He said that Pakistan had an opportunity to increase exports and has come up with a special plan on how to export rice this year.
Copyright Business Recorder, 2021
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