ISLAMABAD: Ministry of finance has said that Inflation is expected to stay at an elevated level owing to market frictions caused by relative demand and supply gap of essential items, exchange rate depreciation, recent upward adjustment of administered prices of petrol and diesel and the ongoing political and economic uncertainty.
Inflation to further jack up
Economic Adviser’s Wing of the Finance Division said in its monthly report that due to the lagged effect of floods, the production losses especially of major agriculture crops have not been fully recovered yet. Consequently, there is a persistent shortage of essential items which may cause Inflation to further jack up as a result of second round effect.
The economic distress resulting from delay of stabilization program has exacerbated the economic uncertainty due to which inflationary expectations have remained strong.
The report stated that the bulk buying during the Holy month of Ramadan may cause demand supply gap, causing the prices of essential items to escalate. However, it added, the government is well cognizant of this and have already taken on board all provincial governments to ensure smooth supply of essential items.
It said the recent monetary policy restrictions and efforts toward fiscal consolidation along with the administrative policy and relief measures are expected to ease out the inflationary pressure by the end of the current fiscal year.
Other statistics
Fiscal deficit during first seven months of current fiscal year was recorded at 2.3% against 2.8% percent of GDP last year.
The primary balance has posted a surplus of Rs. 945 billion during the months of July 2022 to January 2023 against the deficit of Rs. 210 billion last year.
During Jul-Feb FY2023, the agriculture credit disbursement increased by 28.5% to Rs 1073.5 billion from Rs. 835.3 billion during the corresponding period last year.
Current Account Deficit was recorded at $3.9 billion for Jul-Feb FY2023, down from $12.1 billion last year, mainly due to reduction in imports.
The ministry said that Foreign Direct Investment (FDI) fell by 40.4 percent to stand $784.4 million during Jul- Feb FY2023 as compared to last year’s $1315.5 million.
FDI received from China $ 222.8 million (25.5%) Japan $ 133.9 million (17.1%), Switzerland $ 123.0 million (13.6%) of total FDI), and U.A.E $ 88.7 million (10.6%).
