ISLAMABAD: Prime Minister Imran Khan has announced a Rs120 billion subsidy package on three essential commodities for a period of six months ahead of alerting people to be ready for increase in petroleum prices; otherwise, country’s fiscal deficit would get out of control.
In his televised address to the nation, the prime minister said the government has been providing relief to people in petroleum prices by reducing taxes and petroleum levy against increase in oil prices in the international market, adding that it has suffered a massive revenue loss.
According to him, more revenue loss will widen the fiscal deficit further. The government is in need of money for debt servicing and other expenditure, he added.
The present government inherited economy in a woefully bad shape with historic high current account deficit, he said and added that the government did not have enough dollars for debt repayments and servicing.
At this crucial point, friendly countries Saudi Arabia, China, and the UAE, lent a helping hand to Pakistan to help avert default. Then the country approached the IMF (International Monetary Fund) for balance of payment support.
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When the country was moving towards the stabilization phase, the world was hit by the corona pandemic. However, he said, the NCOC worked harder to help the government respond to the Covid-19 challenge in an effective and meaningful manner.
The premier said that inflation is a real issue but it is a global phenomenon as Bloomberg index has noted 60 percent increase in prices during the last one year.
The prime minister said that in this context Rs120 billion package is being provided by the federal and provincial governments to provide subsidy on three essential items in addition to Rs260 billion Ehsaas programme.
The prime minister said that Rs120 billion package entails 30 percent subsidy on ghee, flour, and pulses, and this subsidy will be for the next six months.
He said that the government can possibly expand this package as soon as the economic situation improves.
In addition, he said that 12 million families are being provided Rs260 billion through Ehsaas programme.
The premier said that in Kamyab Pakistan Programme, Rs1,400 billion funds have been allocated and it would provide four million deserving families interest-free loans for construction of houses, starting businesses in urban areas, and skilled training to one member of each family.
Scholarship programme is also connected with it for six million students for education. And lastly, health cards are being provided to the people.
The prime minister appealed to industrialists to increase salaries of their employees from the profit that they are making as it would be of great help at during these difficult times and stated that if two big families belonging to the opposition (the Nawaz Family and the Zardari Family)”bring half the money that they made after coming to power during the last 30 years back”, he would reduce the prices of commodities by half.
Earlier, the prime minister said rice production has shown a 13.6 percent growth, maize eight percent and cotton 81 percent, while other crops are also showing growth, and added the large scale manufacturing (LSM) has been showing a 13 percent growth.
He said that power consumption has increased by 13 percent and Pakistan tax collection increased by 37 percent, and all these numbers reflect the fact that economic activities are growing in the country.
He said as per Bloomberg index during one year a 60 percent increase in prices was recorded but in Pakistan the rate of inflation was nine percent.
He also said that in Turkey, inflation rate soared to 19 percent and its currency depreciated by 35 percent.
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There is a massive increase in gas prices in the US, the UK and other European countries but in those countries prices of imported gas were being raised owing to increase in global prices.
He said that oil price has increased by 100 percent, while in Pakistan, it increased by 35 percent.
He said that petrol price in Pakistan is Rs138 per liter compared to Rs250 in India and Rs200 in Bangladesh.
The country has to import pulses, and palm oil, and this programme is being introduced to lessen the burden of inflation.
He expressed the hope that prices of commodities will start coming down after winter but forewarned that the government has to increase petrol prices.
A statement issued by the Prime Minister’s Office, after the prime minister’s address, stated that Ehsaas Rashan will provide a subsidy of Rs1,000 a month to each of the 20 million families on the purchase of flour, pulses, ghee/cooking oil.
A 30 percent subsidy will be given on these three items, per unit purchase, the prime minister said.
As many as 20 million families identified through the recently completed Ehsaas survey will benefit from the programme.
Overall, 130 million people will benefit nationwide which is 53 percent of the population.
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Yesterday, the federal cabinet gave its approval to launch the programme across Pakistan.
Although the domestic increases are being driven by rising prices in the international market, inflationary control remains an important policy objective for the government.
The programme has been designed as a precision-target system of subsidy delivery focusing on deserving beneficiaries to provide financial assistance for the purchase of essential commodities at a discount through digitally processed transactions.
Ehsaas has developed a digitally-enabled mobile point of sale system in collaboration with the National Bank of Pakistan (NBP) to serve beneficiaries through a network of Kiryana stores designated by the NBP, all over the country.
Ehsaas and the NBP have developed a technology-led, targeted subsidy disbursal programme. This system will digitize parts of the retail sector; there will be use of real time data for decision making.
The use of a digital platform in this programme will help track utilisation of subsidy by each beneficiary at product and geographical level, which will provide much-needed transparency in the process.
This process will help make beneficiaries and store owners more digitally adept.
Participating Kiryana store owners will be required to open bank accounts, which will help further increase financial inclusion and settlement payments made through RAAST will help increase scale of digital transactions in Pakistan.
For online registration of beneficiaries, Ehsaas will open a registration portal next week.
According to the programme design, Ehsaas Rashan will cover 20 million households across Pakistan with a poverty score of less than 39 and an income of Rs31,500 per month.
In the interest of transparency, the registered Kiryana stores and beneficiaries will undergo a rigorous verification process to minimise the incidence of fraud. Under the federal-provincial cost sharing arrangement, the budget of the programme for the next six months is Rs120 billion in this fiscal year.
The federal government and all participating federating units will share fiscal resources in the ratio of 35/65.
The governments of Punjab, Khyber-Pakhtunkhwa, Gilgit-Baltistan and AJK have already agreed to participate in the programme.
In other federating units, federal share of subsidy worth Rs350 per month will be given to each eligible household.
Copyright Business Recorder, 2021
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