ISLAMABAD: The Pakistani finance ministry on Thursday warned that the dollar exchange rate, commodity supplies and seasonality could increase inflation in the country.
Pakistan’s inflation rate is mainly driven by monetary and supply side factors, such as domestic and international commodity prices and dollar exchange rate, seasonal factors and expectations of economic agents.
From May to September, the year-on-year inflation had observed a downward trend, according to the finance ministry. However, the recent surge in international oil prices, exchange rate depreciation and adjustments in administered prices could lead to higher inflation in the country.
“The effect of these impulses may intensify the magnitude of prices and transportation cost,” the ministry said in its monthly economic update.
It said the government was committed to ensure a smooth supply of essential commodities to domestic food markets to protect livelihood of the people and the year-on-year inflation might decelerate in case of no additional impulses in October.
All in all, the statement read, the central forecast for October and beyond showed resumption of a downward trend in year-on-year inflation, but within a broad uncertainty range. “The inflation rate in October is expected to settle below the level observed in September, but the probability range is wide,” it said.
The government has absorbed the pressure of increasing international rates and provided “maximum relief” to consumers by keeping the petroleum levy and sales tax to a minimum level, according to the report.
It will provide targeted subsidies (wheat, sugar and pulses) to 40 percent of the population, for which a database to identify the targeted population has been established.
Fiscal deficit was recorded at 0.9 percent of the gross domestic product (GDP) in the first two months of FY22. It stood at Rs462 billion against Rs415bn in July-August FY21. During the first two months of FY22, the primary balance showed a deficit of Rs37 billion, compared to a surplus of Rs69 billion in the same period last year, according to the report.
Net revenue receipts increased by 7.1 percent to Rs470 billion in July-August FY22, compared to Rs439 billion last year.
A rise in the federal Board of Revenue (FBR) tax collection during the period contributed significantly to the increase in revenue receipts, the report said.
“FBR provisional net tax collection grew by 38.2 percent to Rs1396.4 billion in the first quarter of FY22, against Rs1010.2 billion in the same period of last year,” it read. “The net collection exceeded its quarterly target by 15.3 percent.”
In absolute terms, according to the report, the FBR collected Rs186 billion higher than the target fixed for the first quarter of FY2022. “All the four taxes (customs, federal excise duty, sales and direct) showed excellent performance and exceeded their monthly and quarterly targets.”
