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Business & Finance

Tarin concerned over inflation risks amid PKR depreciation

  • Government trying to reduce the margins of middlemen in order to compensate for inflated prices of food items, says finance minister
  • Expresses hope that international food prices will gradually decline, stabilising the local market
Published August 26, 2021

Finance Minister Shaukat Tarin has said that there is a risk of imported inflation amid Pakistani rupee's depreciation against the US dollar.

Talking to a private news channel, Tarin said the pace of inflation is a concern because, as the rupee falls, pressure on prices increases, which leads to imported inflation mostly across food-related commodities.

“The government is trying to reduce the margins of the middlemen in order to compensate for inflated prices of food items,” said Tarin while expressing hope that international food prices will gradually decline, stabilising the local market.

Tarin's remarks came as the Pakistani rupee continued to decline against the US dollar.

Rupee's fall continues, drops to 11-month low against US dollar

On Wednesday, the PKR closed at 166.28 against the USD in the inter-bank market after a decrease of another Rs1.08 or 0.65%. The US dollar last hit the 166 level back in September last year.

The PKR has now depreciated 5.3% since June 2021, and 8.4% since its recent high against the dollar, according to AHL Research. The PKR has been on a downward trajectory since May 2021, with the rising import bill and a widening current account deficit putting pressure on the rupee.

Meanwhile, the Consumer Price Index (CPI)-based inflation increased by 8.4 percent on year-on-year basis in July 2021 as compared to an increase of 9.7 percent in the previous month and 9.3 percent in July 2020, reported the Pakistan Bureau of Statistics (PBS).

On a monthly basis, it increased by 1.3 percent in July 2021 as compared to a decrease of 0.2 percent in the previous month, and an increase of 2.5 percent in July 2020.

Tarin said that Pakistan needs to increase agricultural productivity, adding that the sector was neglected.

"The government is investing in it. Hopefully, as our crop productivity improves, the prices will also come down."

Import of sugar, wheat approved by ECC

On Wednesday, the Economic Coordination Committee (ECC) of the Cabinet approved import of 200,000 MT of sugar and 400,000 MT of wheat for maintaining strategic reserves and price stability in the market.

The finance minister, as chairman of the ECC, also took notice of price fluctuations in the international market of commodities, and directed to constitute a sub-committee comprising secretary Ministry of Industries and Production, Secretary Commerce, Secretary Finance Division, and Secretary Law Division to hold a consultative session and work out modalities for placing tenders in the international market in a timely manner to get the most affordable price. This would save foreign exchange reserves of the country.

Tarin also directed to present recommendations for improving the overall estimation process by provinces through making forecasts on a scientific basis for commodities where price risk is involved.

Proper estimates should be presented for import of particular food items to fulfill all codal formalities in a timely manner, he stressed.

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