'High inflation: no room for excuses': MoF clarification

In response to the news item titled "High inflation: no room for excuses", published in Business Recorder, it is clarified that there is no denial of prevailing inflation, which is global issue than Pakistan centric. The current incumbent government has been falsely blamed for higher inflation since it came into power.

To put the record straight, core inflation which is stickier and used as benchmark for monetary policy has been lower than headline inflation during the PTI first three years and comparative to PMLN terms, which had enjoyed relatively deflationary period globally in its five years.

Average core inflation during PTI first three years has recorded at 6.9% vs headline inflation 8.8%. If we compare with PML (N)'s average core inflation (6.0%) it was much higher than headline inflation (4.82%). This indicates that the competitiveness during PMLN was compromised as reflected from higher trade deficits due to contraction in export growth (2014-18).

While PPP stand out in headline, core and food inflation with record double digit witnessed in all categories- Headline inflation (13.82%), Core (11.4%), and Food (15.48%). Food inflation in PTI term is question marked and perhaps the only factor which is eating up the PTI political capital in last three years.

Logically, speaking the food price hike is linked with country's food security; PMLN has destroyed the country's comparative advantage of being agricultural country, through serving its vested interests. It is pertinent to note that average agriculture growth (2.18%) during PMLN were lowest since 1990s and even worst when we just focus on crop growth statistics (0.68%).

Agriculture crop growth recorded lowest in PMLN term- Average 0.68%, PPP 1.33% & PTI 1.76%. Despite the locust attack, the PTI government has successfully turned around the crop sector through incentivizing the farmers via attractive support prices, cheaper inputs, and timely payment of crops. Moreover, the focus has further sharpened by issuing the Kissan cards and loans to farmers.

Going forward, we are expecting bumper Kharif crops, and this will add huge sum to rural economy, never seen in last 13 years. Below is the crops target for FY22 and from where PTI took over.

Similarly, PTI government has been wrongly blamed for crisis in the energy sector. Under its belt, it has the credit to negotiate the IPP deals of 1994 & 2002 policies. This has saved hundreds of billion rupees. Despite Covid, Government has managed to bring the circular debt in FY21 to just Rs130 bn from more than Rs 450bn. Currently, the bigger issue for country is going through the excess capacity committed by PML-N government on 'Take or Pay' basis.

This has accumulated the huge capacity payments and in turn circular debt. Number of measures is already in place to improve the electricity consumption, but one cannot avoid the higher tariff to mitigate the looming power crisis.

We are confident of dealing with the structural deficit of the country, but it requires the exogenous crisis to stem first. Not to forget, we had to deal with default risk, higher deficits, threat from India, Covid, and off late Afghan issue and global inflation woes just in last 36 months, but even then, we manage to bring growth back on track.

Lastly, to protect the vulnerable, a relief package of Rs. 120 billion is announced to provide 30 percent discount on ghee, flour, and pulses to 130 million people for next six months. This is over and above of budgetary allocation for FY 2021-22 for EHSAS Program of Rs. 260 billion.

Copyright Business Recorder, 2021