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Economic Survey: Inflation Decreased Significantly Compared To Last Year

Aizbah KhanWeb Editor

11th Jun, 2021. 12:12 pm
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Economic Survey: Inflation Decreased Significantly Compared To Last Year

Amid higher commodity prices, the Economic Survey for the year 2020-2021 states that the July-April Consumer Price Index (CPI) recorded inflation at 8.6 per cent against 11.2 per cent in the same period last year.

According to the details, non-perishable food items contributed to the rise in food and non-alcoholic beverages, which increased by 16% compared to 12.4% in the same period last year.

The highest pressure on prices of non-perishable food items came from the poultry group (chicken, eggs), followed by commodities (wheat, flour, edibles).

Wheat prices rose 24% in April 2021 compared to April 2020 due to supply disruptions, while they fell 9% in March 2021 due to the government’s efforts to ensure uninterrupted supply.

One of the initiatives was the timely release of wheat by procurement agencies in the provinces and its supply through utility stores, fair price shops.

Prices of edible oil, palm oil and soybeans have continued to rise in global markets since June 2020, amid a sharp contraction in global inventory levels due to weather-related concerns in large production areas.

Prices of housing, water, electricity, gas and other fuels rose 5.7 per cent during July-April from 7.1 per cent in the same period last year.

In the first quarter of FY21, the consumer price index was down 8.85 per cent from 10.08 per cent a year earlier, but food prices remained high.

The second quarter of FY21 saw a major stimulus in the Consumer Price Index (CPI), which was due to price differences between the provinces.

The uninterrupted supply of food items by the government in the third quarter of FY21 helped keep inflation at 7.8 per cent against 12.38 per cent in the same period last year.

However, due to the economic recovery, prices of restaurants, hotels, clothing, footwear, housing, water, electricity, gas and other fuels remained relatively high.

Fiscal Deficit Projected At 7% Amid Lower Expenditures, Rise In Revenue

The Finance Ministry has estimated a 7 per cent fiscal deficit for the outgoing fiscal year, despite the reduction in the expenditures and increase in revenues.

According to the Economic Survey of Pakistan released on Thursday, the fiscal deficit has been estimated at 7 per cent of GDP during the outgoing fiscal year 2020/21, compared with 8.1 per cent in the preceding fiscal year.
The ministry estimated the expenditures to be around 22.9 per cent of GDP in the outgoing fiscal year, compared with 23.2 per cent of GDP in the preceding fiscal year.

In contrast, the ministry projected a total revenue at 15.9 per cent of GDP in the fiscal year 2020/21, compared with 15.1 per cent in the preceding fiscal year, the survey showed.

The fiscal sector had witnessed significant challenges due to additional expenditures made to lessen the negative impact of Covid-19. However, the government’s fiscal consolidation efforts provided significant support in maintaining fiscal discipline, increasing revenues and controlling expenditures; thus, the fiscal sector continued to perform better.

The fiscal deficit was contained at 3.5 per cent of GDP during July-March FY21 against 4.1 per cent of GDP in the same period of the last year.

The primary balance posted a surplus of Rs451.80 billion during July-March, FY21 against the surplus of Rs193.50 billion in the same period of the last year.

The tax collection by the Federal Board of Revenue (FBR) witnessed a rise in 10 months. During July-April FY21, the total collection grew 14.4 per cent to stand at Rs3.78 trillion against Rs3.303 trillion in the same period of FY20. The tax collection surpassed the target by more than Rs100 billion during the period under review.

The revenue performance is not only a reflection of the growing economic activities without any disruption even in the wake of the third wave of Covid-19 but it also suggests that the efforts to improve the tax collection through various policy and administrative reforms are bearing the fruits.

The non-tax revenues stood at Rs1.227 trillion during July-March FY21 against Rs1.324 trillion in the same period of the last year, showing a decline of 7.3 per cent. The decline is mainly attributed to the absence of a one-off renewal fee for GSM licences from telecommunication companies.

The efficient expenditure management effectively curtailed the overall expenditures during the current fiscal year. The total expenditures grew 4.2 per cent during July-March FY21, compared with the growth of 15.8 per cent during the same period of FY2020.

At present, the fiscal policy measures are mainly focused on relief to support businesses and to protect vulnerable segments of society. Simultaneously, the government is focused on containing the fiscal deficit at a manageable level and keeping the primary balance at a sustainable level. The fiscal performance during the first three-quarters of FY21 is satisfactory.

However, challenges to fiscal performance still persist, which largely depend on the domestic and international evolution of Covid-19 and its perils for the economy. Nevertheless, effective revenue mobilisation and prudent expenditure management strategy would be supportive in coping with these challenges, the survey revealed.

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