The government in the Memorandum on Economic and Financial Policies for 2013 to 2016 submitted to the IMF acknowledged that "inflation would not be a primary focus in the first year of the programme,"... however based on the government''s revenue and expenditure budgetary projections the Fund projected a rate of inflation well below what has been achieved during the past five months of the current year.
In July the CPI stood at 8.26 percent, in August 8.55 percent, in September 7.39 percent and in October at 9.8 percent. Unless the government takes appropriate corrective policy measures to combat inflation the IMF projection of 7.09 percent is not likely to be achieved sources in the Finance Ministry told this correspondent.
The Fund in a press briefing dated 21 November uploaded on its website stated in response to a query that "inflation is often the heaviest tax on the poor and places the heaviest burden on them. So, we believe that social protection is key to successful implementation of the programme. And the government has agreed to put in place policies to protect the most vulnerable segments of the population from the short-term impacts of reforms. In the short-run the programme includes a significant increase in targeted transfers to the poor."
Sources on condition of anonymity stated that rise in wheat price is going to fuel inflation by more than the recent rise in vegetable prices. An official told Business Recorder that there was also heated discussion in the last Economic Co-ordination Committee (ECC) of the Cabinet meeting on the issue of sharp increase in prices of vegetables but there was no discussion about the impact of rise in wheat price which would also affect the prices of other items.
They added that a major reason for inflation was through heavy reliance on domestic borrowing and unless the government takes appropriate revenue measures to bridge the fiscal gap inflation may continue to rise. In addition, the increase in price of petroleum products, electricity as well as depreciation of the rupee has also contributed to the current spike in inflation.
Sources said inflation would also be discussed in the ECC meeting today (Wednesday) and the Finance Minister has sought details of prices of essential items, including vegetables during the last two weeks to see the trend.