ISLAMABAD: The Finance Ministry has attributed the increase in the prices of essential commodities to upward adjustment in gas and electricity prices, market-based exchange rate, and increase in commodities' prices in the international market, saying the government is planning "targeted subsidy" to provide relief to the deserving persons.
The Finance Ministry stated that the efforts were made to control the price hike, which happened due to increase in international commodity prices and due to requisite upward adjustment in overdue gas and electricity prices, market-based exchange rate adjustments required for correcting macroeconomic imbalances.
The government is taking several steps to reduce the prices of items of daily use, particularly wheat flour and sugar.
The ministry maintained in a statement Thursday that overall, the emphasis had been on price control through different policy, administrative and relief measures. The government made effort to ensure smooth supply of commodities by taking strict measures against hoarding, smuggling and undue profiteering.
Also monitoring of prices both at the federal and the provincial levels was ensured. Further, under the prime minister's relief package, Rs10 billion have been released to the Utility Store Corporation (USC).
Moreover Rs21 billion have already been disbursed to the USC for basic food items.
The Finance Ministry said that the COVID-19 had major impact on the economy and by the end of fiscal year 2020, Pakistan's economy suffered from the COVID-19 outbreak through various channels like decline in domestic and global demand, lower tourism and business travel, trade and production linkages, and supply disruptions, etc.
The last quarter of fiscal year 2020 bore the most significant brunt of the COVID-19 crisis but improvement in economic activities can be seen since the start of new fiscal year 2021.
After four months of decline, export from Pakistan registered an increase of 25 percent in July 2020 on month-on-month basis and six percent on year-on-year basis indicating a rebound in export-oriented industries.
While imports reduced by 2.0 percent to $3.6 billion against $3.7 billion last year.
Consequently, trade deficit reduced by 10.2 percent to $1.6 billion against $1.8 billion last year. The FBR tax collection witnessed an impressive performance as it grew by 4.7 percent to Rs290.5 billion against Rs277.3 billion last year.
While the actual tax collection has surpassed the target of Rs243 billion set for July, FY2021.
On monthly basis, the LSM has started showing signs of recovery as it posted a positive growth of 16.8 percent in June, 2020 over May, 2020.
Another important indication of economic recovery is significant rise in total cement dispatches.
It increased by 37.8 percent to 4.838 million tons in July 2020 compared to 3.512 million tons in July 2019, while domestic consumption increased by 32.7 percent to 3.953 million tons in July 2020, compared to 2.979 million tons in July 2019.
The government expects that new "Shipping Policy", ML-1 Railway Line Project under the CPEC, incentive plan for the building and construction sector, and Amazon Data Services Pakistan (Pvt) Ltd (to bring its cloud computing business) to stimulate the employment generation activities.
The National Agriculture Emergency Programme, "Kamyab Jawan Program (low-cost loans to youth for business)", "Naya Pakistan Housing Programme" to construct five million houses in five years and the Ten Billion Tree Tsunami have been launched for job creation.
The schemes will generate sizeable employment.
Prior to the pandemic, the GDP growth was estimated at 3.24 percent for the fiscal year 2020, with agriculture 2.85 percent, industry 1.95 percent, and services 4.04 percent.
However, as a consequence of the COVID-19, 2020 fiscal year posted a negative growth of 0.4 percent (provisional) against 1.91 percent (revised) recorded in FY2019 on the basis of 2.67, -2.64 and -0.59 percent growth in agricultural, industrial and services sectors, respectively.
The Ehsaas Emergency Cash Programme with total allocation of Rs144 billion to provide immediate cash relief of Rs12,000 to 12 million families of daily wage earners, and now the Ehsaas Emergency Cash Programme has completed its original target of distribution of funds to over 12 million beneficiaries, the government has set a new target of 16.9 million beneficiaries and budgetary allocation raised to Rs203 billion.
In order to meet the financing requirement for these expenditures, additional resources have also been mobilised through various international financial institutions including the IMF, the World Bank, and the Asian Development Bank (ADB), etc.
As the new fiscal year 2021 started, early signs of economic recovery have started to unfold in terms of better tax collection by the FBR and significant growth in exports.
The ministry added that the government initiatives and subsequent achievements were acknowledged by the IFIs, in particular, the IMF in its review (December, 2019).
At the start of the fiscal year 2020, the economy started to turnaround in terms of improved external and fiscal accounts, stability in exchange market, and growing investor confidence.
The external sector has been stabilised as the current account deficit narrowed by 77.9 percent during the fiscal year 2020.
Remittances increased to $23.1 billion and the Foreign Direct Investment (FDI) to $2.6 billion.
To further strengthen the external sector, the second phase of the Pak-China Free Trade Agreement was implemented, the National Tariff Policy was approved to remove anomalies, E-Commerce policy was approved, and government's various efforts remained supportive in improving fiscal accounts as all major fiscal indicators witnessed a visible improvement and fiscal deficit was contained at 8.1 percent.
The decline in fiscal deficit has been due to 28 percent growth in total revenues relative to the growth in total expenditures (15.6 percent).
Non-tax revenues posted an historical impressive growth of 257 percent, while tax revenues grew by 6.1 percent in FY2020 over the last year.
Similarly, the primary balance, which remained in surplus during first nine months and despite corona contracted to 1.8 percent of the GDP compared to 3.6 percent of the GDP a year before.
Within revenues, the FBR tax collection grew by 4.4 percent to stand at Rs3,998 billion in fiscal year, and collected Rs91 billion more than the revised target set for the year just concluded.
Copyright Business Recorder, 2020
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