Finance Minister Muhammad Aurangzeb chaired the Economic Coordination Committee (ECC) of the cabinet meeting, which took these decisions, including a briefing on prevailing inflation trends. The ECC and the Monetary Policy Committee of the State Bank of Pakistan (SBP) made contradictory statements about the inflation outlook. The ECC's handout suggested that inflation was stabilising, while the SBP said it was on the rise.
A finance ministry handout stated that the ECC discussed a Ministry of Defence request regarding the allocation of Rs6 billion in favour of PIA Holding Company Limited (PIAHCL) for the settlement of liabilities of Pakistan International Airlines Corporation Limited (PIACL). "Out of the total amount, the committee approved funding for reimbursement of medical and pension payments as well as for salary disbursements," said the finance ministry. The committee approved Rs4.4 billion for clearing medical and pension bills. The decision underlines that the government gave extraordinary favours to sell 75% of PIA's stakes.
The ECC approved another Rs455 million for salary payments to employees of the Precision Engineering Complex, which had been separated from PIACL and given to the Ministry of Defence. The ECC did not approve a Rs1.1 billion allocation for PIACL and asked that the matter regarding payment to the National Insurance Company Limited (NICL) by PIACL be taken to the relevant revenue authority for adjustment, in line with auditor recommendations. The Federal Board of Revenue (FBR) has already refused to give Rs1.1 billion in refunds that PIACL is seeking.
The government sold 75% of PIA's stakes for Rs135 billion, and the Share Purchase and Subscription Agreement states that PIACL must maintain net positive equity as an agreed-upon condition precedent for its successful divestment. However, net equity is not possible without the government's financial support.
In a briefing to the ECC, Chief Economist of the Planning Commission Dr Imtiaz Ahmad informed that following a period of volatility, recent data indicates gradual stabilisation in prices, supported by coordinated efforts at federal, provincial and district levels. "The presentation noted that inflationary pressures, while present, are showing signs of moderation, with emerging trends pointing towards improved price stability," said the finance ministry.
However, the SBP on Monday increased the interest rate by 1% to 11.5%, claiming that inflation was on the rise. In a handout, the SBP said the Monetary Policy Committee assessed that "inflation is likely to increase and remain above the target range in the next few quarters". Accordingly, the MPC deemed it necessary to maintain a tighter policy stance to keep inflation expectations anchored and contain second-round effects of the current supply shock to bring inflation within the target range, it added.
Many have questioned the SBP's move to increase interest rates to control oil supply shock-driven inflation. The Express Tribune reported this month that the central bank had already conceded to the IMF that it would raise interest rates to contain war-driven inflation in Pakistan.
"If prices in Pakistan are rising, it is not because of excessive demand. It is because of the rise in oil prices and disruption in the supply chain, over which we have no control," said Dr Ashfaque Hasan Khan, former director general of debt. He said that by raising interest rates, the government cannot reduce the price of oil or restore the supply chain.
The ECC approved a Rs311 million supplementary grant in favour of the Balochistan government to support the prime minister-approved incentive package for bureaucrats belonging to the police and Pakistan Administrative Services. The package was announced to compensate officers holding domiciles other than Balochistan who may be reluctant to serve in the province due to the additional cost of living in remote areas, lack of logistic facilities and support, and social isolation.
The ECC also approved Rs372 million in favour of the National Accountability Bureau (NAB) under the Ministry of Law and Justice to support digital transformation and the implementation of AI-based systems. It approved Rs30 million in favour of the Ministry of Inter-Provincial Coordination for financial rewards to the Pakistan national hockey team for qualifying for the FIH Hockey World Cup after eight years. The secretary of the ministry had moved the proposal for financial rewards of Rs1.5 million for each of the 20 squad members.
The ECC further approved a summary to introduce a prohibitory clause on the import of goods produced through forced labour. The ban has been imposed due to Pakistan's international commitments under the GSP Plus scheme.
The ECC allowed the temporary import of used vehicles and auto parts for repair, refurbishment and subsequent re-export under a pilot project, with directions for review after one year, said the finance ministry. It was further decided that the policy framework should also include plant machinery and other equipment that can be refurbished and re-exported. The current import policy does not provide for the temporary import of used vehicles and auto parts for refurbishment and subsequent re-export. The ECC decided that such temporarily imported vehicles and parts will not, under any circumstances, be sold, transferred or otherwise disposed of in the tariff area.
The ECC also considered a summary submitted by the National Food Security and Research Division seeking approval of recommendations regarding the export of donkey meat and hides from the Gwadar Donkey Slaughter House, and approved a proposal for the disposal of existing inventory according to applicable regulations and export protocols.