Economy on strong footings to absorb trade deficit, inflationary pressures: Tarin
ISLAMABAD: A record trade deficit, double-digit inflation and increase in the interest rate of T-bills auction created panic at the Pakistan stock market but the economy is on strong footings and will grow beyond 5 per cent in this financial year, a senior government official said on Friday.
In a media briefing along with Adviser to the Prime Minister on Commerce and Investment Abdul Razak Dawood, Adviser to the Prime Minister on Finance and Revenue Shaukat Tarin said that the trade deficit crossed $5 billion in November, mainly because of the increase in import of raw materials for the petroleum and energy-related products by $508 million and $205 million, respectively.
The purchase of vaccines worth $545 million and machinery imports of $165 million also contributed to the burgeoning trade deficit, he said, adding that the spike in the commodities prices in the international market hit all the developing economies such as Pakistan.
“Last year, the trade deficit of India was $10 billion, which is now over $20 billion,” he said, adding that it is an imported inflation, which would come down soon, as petrol prices have already come down from $87 to $68/barrel and coal price from $140 to $110/tonne.”
Tarin said that because of the gas shortage, the government was compelled to import $150 million of furnace oil. He expressed the hope that the liquefied natural gas (LNG) prices and edible oil will also come down.
The finance adviser admitted the fact that the double-digit inflation has badly affected the common man, adding that the lower middle class is the worst victim of the ongoing inflation and the government is fully aware of their plight and providing them targeted subsidies through Ehsaas Programme and other such initiatives.
He said because of higher commodity prices the rural economy is doing well and an increase in cars and motorcycle sales is evidence of it.
The Federal Board of Revenue’s (FBR) collection grew 36 per cent in the first five months and this is totally a misconception that the growth is the result of taxes on rising imports.
“Alone in the income tax, the growth is 32 per cent, which shows that the economy is doing well and the companies are making profit,” he said.
The listed companies earned the profits of Rs960 billion and they should share some of their profits with the employees who are facing inflationary pressures.
Tarin dispelled the impression that any mini-budget was on the cards. The International Monetary Fund (IMF) wanted tax exemptions of Rs700 billion but he convinced them to reduce it to Rs350 billion.
He admitted the fact that because of the exemptions, the prices of some commodities will increase but the government will compensate for this increase through subsidy or any other initiative because of the financial cushion it has due to phenomenal revenue growth.
For additional revenue measures, the money bill will be presented in the Economic Coordination Committee (ECC) of the Cabinet and then in the Federal Cabinet for approval. The whole process will take 7 to 10 days, he said.
Dawood said that in October the import bill was $6.3 billion, which jumped to $7.7 billion in November but now it is likely to come down in December.
In November, the exports reached the highest level in a single month with $2.9 billion, whereas the previous record was set in October with $2.7 billion.
Dawood said that before that $2.3 billion of exports were done in September 2013.
“After long time, our exports are gaining momentum and hopefully the exports in December will cross $3 billion, which will also be a record,” he added.
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