MoF lists factors behind higher food inflation

The Ministry of Finance has said that adverse effects of pre-monsoon rains on wheat crop, disruption of supply chain of essential items owing to harsh winter, delay in harvest and arrival of crop in the market, and lower production of vegetables, especially of tomatoes in Sindh, led to higher food inflation.

The Finance Ministry added that, however, the change of weather and better supply of potatoes, tomatoes and onions should result in smooth supply and decrease in price pressure. The outcome of stabilization policies, agriculture sector interventions, rigorous monitoring at federal and provincial levels as well as favorable weather would bring in better results in easing out inflation and sustain the economy towards growth and productivity in the coming days.

Adverse effects of pre-monsoon rains on wheat crop, disruption of supply chain of essential items due to harsh winters and thick fog, delay in harvest and arrival of crop in the market and lower production of vegetables, including tomato in Sindh, led to a higher food inflation but the change of weather and better supply of potatoes, tomatoes and onions should result in smooth supply and decrease in price pressure, stated Finance Division in an official statement Monday.

The Finance Division noted that another factor contributing to higher inflation was the global price impact due to international commodity prices, as palm oil price increased by 43.9%, soybean oil by 12.8%, crude oil by 16.6%, etc, in December 2019 over December 2018, and these factors also pushed up the domestic prices. Downward trajectory in crude oil in the market will result in downward pattern in domestic prices in coming months.

While the factors above are likely to ease the inflation, the government has also taken several relief measures to protect the vulnerable from the price-hike.

These measures include provision of subsidy to Utility Stores Corporation on 05 essential items for which Rs 7 billion have been transferred to Ministry of Industries and Production; Rs 226.5 billion allocated in the budget for low end-consumers using less than 300 units of electricity in a month and of these Rs 141 billion have already been released so far; PM's Ehsaas program with doubled social safety net allocation of Rs 190 billion from 100 billion; out of Rs 24 billion allocated for gas subsidy, Rs 12 billion have so far been released; and Rs 1,000 per family were given to 5.1 million families as a special transfer in August 2019.

Similarly, Rs 5,000 quarterly tranche was paid to 4.3 million poor families in December 2019. Under Kifaalat monthly stipends of Rs 2,000 per month will be provided to 4.5 million families starting from February, 01 2020; 1 million new beneficiaries will be added to Kifaalat in the next five months with a monthly transfer of Rs 2,000; undergraduate scholarships to cover the cost of tuition fee and other expenses at the university for 50,000 needy students; Rs 750 for boys and Rs 1,000 for girls quarterly stipends will be provided to primary school going children and three million children have been covered; record allocation of Rs 152 billion has been made for merged FATA districts; and GST on LPG has been reduced to 10% from 17%.

The Ministry of Finance said the government has also devised a strategy to control and ease out the impact of inflation through a host of policy measures which included ECC permission for import of 0.3 million tons of wheat to decrease the local wheat price and meet the domestic requirement; and zero borrowing by government from SBP in current fiscal year.

The government retired Rs 837.2 billion (July 1 to January 17, 2020) compared to borrowing of Rs 3770.5 billion during the same period last year, reduction in fiscal deficit, primary surplus during first half of fiscal year 2020 and monetary tightening and demand compression by austerity as well as complete restriction on supplementary grants.

Prices monitoring Cell in Ministry of National Food Security & Research has been set up to check price hikes of essential food items, network of Sasta Bazaars and Utility Store (USC) outlets is being expanded for provision of essential items, for cheaper Roti, a subsidy of Rs 1.5 billion has been provided for public tandoors (ovens), the provincial governments are monitoring display of price list and quality of items in open market, and Sasta Bazaars and effective measures and being taken by the CCP to control cartelization and undue profiteering.