Daily Times

The All Pakistan Business Forum (APBF) has observed that the monthly inflation rate has reached an eight-month high in previous month of July due to direct and indirect taxes of Rs1.8 trillion in the Budget of current fiscal year of 2024-25.

APBF President Syed Maaz Mahmood said that the pace of inflation rose 2.3% compared to the preceding month, in the wake of higher prices of food and energy despite recent cut in the prices of petroleum products, as essential commodities have still not seen a decline in prices, leaving trade and industry frustrated.

The reading shows higher inflationary pressures as the monthly index normally stands around 1%. The impact was more pronounced in cities where the new tax measures hit the consumers hard. The monthly food inflation in July came in at 4.5% in urban localities.

The APBF Chairman Ibrahim Qureshi said that the government has imposed a record Rs1.8 trillion in new taxes in the new budget for winning a $7 billion bailout package from the International Monetary Fund. Taxes have been slapped on the salaried persons and the consumable goods used mostly by all segments of society, irrespective of their income levels.

Ibrahim Qureshi said that Pakistan has been facing a high inflation for the past couple of years partly due to massive depreciation of the rupee against the US dollar and partly due to a surge in global commodity prices like energy cost. The country largely meets its energy demand through expensive imports.

There was a significant increase in prices of those items which had either been affected by the imposition of sales tax or 2.5% withholding tax on their supplies. The average wheat flour price of a 20kg bag increased by Rs170, or 10%, to Rs1,943 in July over the preceding month.

Likewise, owing to 10% sales tax on poultry feed, chicken prices rose by 12% to Rs382 per kg compared to the pre-budget month. Powdered milk got expensive by 17%, or Rs140, to Rs992 per pack following the imposition of sales tax and withholding tax. PBS data revealed that sugar prices increased to an average of Rs146 per kg. The price was higher by Rs6 per kg compared to the ceiling set by the government at the time of allowing export of 150,000 metric tons in June. As expected, the Pakistan Sugar Mills Association has refused to accept the blame for the price hike, saying it could not control market forces. But the association had told the government that it would make sure that sugar prices did not go up after exports.

Maaz Mahmood stressing the need for putting the economy on a sustainable growth trajectory by providing incentives to the industry, lamented that the economy is facing multiple challenges of falling exports, high inflation, low growth and declining foreign reserves, with fiscal accounts under immense pressure on account of heavy interest payments. He asked the government to address the underlying structural vulnerabilities through smooth energy supply at competitive rates, as country’s overall export proceeds continued to shrink for the fifth consecutive month in a row.