Public debt on declining trend, inflation to remain at around 8%: Tarin

ISLAMABAD: Federal Minister for Finance and Revenue, Shaukat Tarin said on Tuesday that the country’s net public debt was on a declining trend and reduced to 81.8 percent of debt-to-GDP ratio during the fiscal year 2020-21, expecting that it would come further down during the current fiscal year.

Addressing a press conference here the minister said that net debt was recorded at 86.8 percent of Gross Domestic Product (GDP) during the fiscal year 2019 whereas it stood at 85.7 percent of GDP during FY2020, which indicated that it was on a declining trend during the last three years of the incumbent government.

The minister, who was accompanied by Minister of State for Information Farrukh Habib and Special Assistant to Prime Minister on Food Security, Jamshed Cheema, however, said that the debt was recorded at 74.1 percent of GDP during the fiscal year 2018.

Explaining some underlining reasons for the increase in public debt, the minister said that when Pakistan Tehreek-i-Insaf assumed power in 2018, it had to go to the International Monetary Fund (IMF) program, which he said led to the devaluation of the rupee from 104 to 167and increase in the discount rate to 13.25.

Hence, this enhanced debt servicing from Rs 1500 billion to Rs 2900 billion instantly, which enhanced the public debt, the minister said.

Giving absolute figures of net debt during the last four years, the minister said that currently, the country’s net debt stood at Rs39 trillion compared to the net debt of Rs35.6 trillion in Fy2020, Rs33 trillion during FY2019, and Rs25.7 trillion during FY2018.

The minister said that there has been gradual increase in foreign exchange reserves held by the State Bank of Pakistan.

Briefing about inflation, the minister said the government had tried its best not to pass on international price’s impact on people, saying that the prices of various commodities were still low as compared to international and regional markets.

For example, sugar prices increased by 48 percent in the international market but the government enhanced it only by 12 percent. Palm oil increased by 50 percent, but it went up by 33 percent, wheat prices increased by 32 percent in one year and here it enhances only by 15 percent, prices of crude oil increased by 58 percent  (from $44 to $70 per dollar) and in Pakistan, it increased by only 9.39 percent.

The minister said that increase in prices was an international issue right now. He said that in Pakistan, the Consumer price index (CPI) based inflation stood at 4.8 percent in 2018, which went up to 6.8 percent in 2019 and then 10.74 percent in 2020 and reduced to 8.9 in 2021, and now it would remain at 8 percent during the current fiscal year.

The minister said that the prices of various essential commodities have considerably increased in the international market, citing that sugar was sold at $303 per ton in 2018 now it is sold at $430 per ton. Likewise, wheat was sold at $188 per ton in 2018 now it is sold at $274 per ton while soybean was at $775 per ton in 2018 and now it is sold at $1436 per ton, indicating a big jump. The palm oil prices increased from $621 per ton to $1136 per ton.

The increase in international prices during the past couple of years was due to low food production and high demand owing to covid-19 and supply chain disruption.

He said, in Pakistan, food inflation in July 2020 was 15.1 percent (Urban), 17.8 percent (Rural) now reduced to 10.2 percent (urban), and rural 9.1 (rural), showing around 5 percent decline in urban inflation and 7 percent in rural.

The minister, however, was of the view that Pakistan was linked to the international market as it had to import, wheat, sugar, pulses, ghee, hence, the prices impact the local market.

He said that there was a need to enhance production, which he said was the strategy of the government as it had already earmarked a hefty amount for this purpose. In addition, he added, the government would make a scientific engineering process to analyze profits in the supply chain and squeeze the role of middlemen administratively.

In addition, he said, the government was also building strategic reserves to flood markets at times of need. In the medium and long term, the government would build commodity warehouses, cold-storages so that farmers and purchasers are linked directly without involving middlemen.

The minister said that the government also intended to provide targeted cash subsidies to around 40 percent of the poor population to buy essential items, adding that the subsidies would be provided for purchasing flour, sugar, and pulses, and data of Ehsaas would be utilized for this purpose to target deserving population.

He said that the government also intended to increase income and affordability of people to buy commodities, adding that the growth strategy introduced by the government was bearing fruit, adding that according to some observers, the economy was growing by around 6 percent.

He said that Kamyab Pakistan Programme would also be launched this month with a bottom approach to help low-income people. He also termed the Sehat Card as a big initiative of PTI.

The minister while talking about State Owned Entities (SOEs) said these were earning a net profit of around 204 billion which declined to a net loss of Rs286 loss in 2018. In 2019, the first year of the PTI government, the loss was reduced to Rs143 billion.

The minister said that around ten top loss-making enterprises account for 89 percent of the aggregate losses and therefore attention was focused on these SoEs including PIA, Pakistan Railways, Pakistan Steel Mills, Discos, and ZTBL.

He said that a board was being established in Privatization Commission to turn around these 10 SOEs. The board would be independent having world-class professionals to stabilize these entities. 

Speaking on the occasion, Special Assistant to Prime Minister on Food Security, Jamshed Cheema said that government would provide cash subsidies to low-income people to buy essential food products.

He said that the government would also launch a program to help maintain prices and quality of milk in the country.

He said that the government wanted to shift agriculture towards promising crops keeping in view the growing population and increasing demand for food. TF Report