Tarin attributes inflation to instability in exchange rate

Finance adviser says govt to table mini-budget next week

Our Correspondent November 24, 2021
Finance Minister Shaukat Fayaz Ahmed Tarin gestures during a press conference. PHOTO: AFP/FILE


Finance Adviser Shaukat Tarin has identified instability in the exchange rate as a major drawback to control inflation as he maintained that the government was trying to overcome the surge in prices.

In an interview with a private TV channel on Tuesday, Tarin said instability in the exchange rate has increased inflation and the government was trying to lessen its burden on people belonging to the low-income group.

Tarin attributed inflation to a decline in the exchange rate, saying the government needed to keep it near to the "real effective exchange rate" that is Rs166-167.

He said the government should not let the exchange rate overvalue or undervalue, adding that the government should have bought the US dollars when it was Rs152 and sold it at Rs175.

Tarin said the rupee was undervalued by Rs9, adding that this was affecting food imports causing inflation.

Read More: Rupee drops to historic low

Earlier this month, Tarin had blamed speculators for the rise in the value of the US dollar against the Pakistan rupee.

During the interview, Tarin said the government will table a "mini-budget next week" to meet the demands of the International Monetary Fund after both sides reached an agreement last week.

Tarin said as per the IMF demand, the government will impose new taxes to the tune of over Rs300 billion. He added that the IMF wanted new taxes up to Rs700 billion but he managed to reduce the amount after months-long negotiation.

Tarin said the government also didn't agree to hike power tariff by more than Rs4 as demanded by the IMF as it didn't want to overburden the people.

The government will increase the power tariff less than the demand of the IMF, he added.

According to Tarin, the IMF also wanted 17 per cent sales tax across the board.

Tarin said the State Bank of Pakistan (SBP) chief will be appointed by the federal cabinet, adding that the term of the governor will be five years but it would be renewable.

The finance adviser also commented on the gas crisis in Pakistan, saying the government failed to procure gas when it was being sold cheap in the global market.

The government missed the opportunity for cheap gas, he said, adding that now the prices of the commodity were high in the international market.

The finance adviser said the track and trace system (TTS) of the Federal Board of Revenue (FBR) will be implemented in various sectors to broaden the tax net, adding technology was being employed for the purpose.

On Tuesday, Prime Minister Imran Khan had inaugurated the TTS as part of the government’s efforts to crack down on tax evasion and illicit trade in different sectors. During the inauguration ceremony, the premier noted that the rising foreign debt and low tax revenue had become an issue of “national security” because the government did not have enough resources to spend on people’s welfare.

The FBR's TTS will ensure electronic monitoring of the production and sale of important sectors including tobacco, fertiliser, sugar and cement.

This will help bring transparency to the system and enhance the country's revenue.

Under the system, no production bag of sugar will be taken out from the factory and manufacturing plant without a stamp and an individual identity mark.

In the next phase, the FBR is planning to introduce the track and trace system in the petroleum and beverages sectors.


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