Advisor to Prime Minister on Finance and Revenue Shaukat Tarin has expressed concern over inflation owing to rise in rates in the international market, but showed confidence that the exchange rate would improve in the coming days.
“I am mostly concerned over increase in inflation due to the hike in prices internationally," said Tarin, while talking to a private TV channel on Monday. "This has created hardships for the urban middle-income groups."
He said that the industries located in the urban centres have made Rs950 billion in profits, but they are not providing enough incentives to their employees, “and we have concerns regarding it”.
Meanwhile, Tarin reiterated that Pakistan's economy is on a growth trajectory, and this causes the trade deficit to grow.
“When the economy grows, the trade deficit also increases. Pakistan's imports have grown 60%, which is due to oil imports as well as auto, and this is being pulled back,” said the advisor.
As per the latest figures released by the Pakistan Bureau of Statistics (PBS), Pakistan’s exports during July-October, 2021 totaled $9.462 billion (provisional) against $7.573 billion during the corresponding period last year, an increase of 24.94%.
However, the country’s imports during July-October 2021 totaled $25.101 billion (provisional) as against $15.176 billion during the corresponding period last year, an increase of 65.40%.
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Overall, the trade deficit widened by 105.43% from $7.603 billion in July-October 2020 to $15.639 billion in July-October 2021.
Tarin said Pakistan’s foreign exchange reserves held by the central bank are increasing. “This means that there is an inflow, and not outflow (of dollars).”
Tarin added that the economy is growing more than expected, “and we need to cool it down, which we will do now”.
Talking about the ongoing volatility in PKR/USD exchange rate, the ex-banker said that Pakistan would receive payments from the International Monetary Fund (IMF) and Saudi Arabia, which will improve the exchange rate.
“Our exchange rate would stabilise if our inflation rate declines. We need to keep the inflation rate at 4-5% to stabilise the exchange rate. Secondly, our mechanism should be strong enough to stop speculators."
Tarin maintained that the measures taken to tighten imports would not affect the government’s tax revenue. “Our domestic economy has grown, which has led to increase in sales tax collection, and the biggest barometer is that our income tax collection has increased by 32%, which shows that the economy is growing and public income is increasing, so I am not concerned if we tighten imports,” he said.
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Talking about the IMF programme, Tarin informed that the lender has demanded an increase in power tariff but the government did not have any intention to put more burden on the masses.
He added that it also called for an increase in income taxes to the tune of Rs190 billion. “However, we call for tax base broadening, then pyramiding,” said Tarin.
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