Fuel, electricity price hikes to boost inflation: Ministry of Finance
Business
Says Kissan Package having a positive impact
ISLAMABAD (Web Desk) – The massive hike in fuel prices and power tariff in August would increase inflation in the coming months, says the Ministry of Finance, in yet another indirect admission of the policy failures guided by the International Monetary Fund (IMF), which have made the lives of an overwhelming majority miserable in Pakistan.
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As the ministry released the Economic Update and Outlook for August 2023, it says inflation was expected to remain around 29 to 31 per cent after the fuel price hikes boosted the transportation cost.
This admission is bad news on another count, as rising inflation means Pakistan may well see another rate hike under the tight monetary policy followed by the State Bank of Pakistan and strictly recommended by the IMF.
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Last week, the Ministry of Finance had stated in Fiscal Risk Statement that Pakistan remained vulnerable to key macroeconomic variables – low GDP growth, high interest rates, skyrocketing inflation and the depreciating exchange rate.
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It had also noted debt and the state of affairs concerning the state-owned enterprises (SOEs) among the main risks to Pakistan’s fiscal outlook, which included the delay in implementing structural measures to reduce debt and to reform the power sector amid the rising circular debt.
The ministry in the Fiscal Risk Statement said that the inflation outlook had deteriorated, and there was heightened risk to external stability with the uncertainty surrounding the future adjustment path in energy prices being the main upside risk to the inflation outlook.
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As far as the latest document is concerned, the finance ministry is upbeat that the extension of Kissan Package-2022 will have a positive impact on the agriculture sector by contributing to achieving the targeted growth for the fiscal year 2023-24.
The report says the international food price index tracked by Food & Agriculture Organisation (FAO) had slightly decreased in July when compared to the same month last year which could ease out domestic prices.
At the same time, the high base effect of over 29pc rate of inflation last year could provide a “little solace to inflation growth”.
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However, it expects lagged impact of accumulated monetary tightening, fiscal consolidation efforts and better growth outlook would help easing out inflationary pressures in the second half of 2023-24.
