Islamabad - The Pakistan Muslim League-Nawaz (PML-N) government would struggle to restrict inflation at eight percent during the upcoming financial year 2013-14 due to the steps taken in budget including reducing subsidies and putting additional taxation burden on the masses.

The government has reduced the subsidies by 35 per cent in the budget for the next financial year 2013-2014. The govt has proposed a total amount of Rs 240 billion for the subsidies in the budget for fiscal year 2013-14 against Rs 367 billion provided in the previous year. On the other hand, the government has put additional taxation burden of Rs 168 billion on the helpless people. Therefore, government would struggle to keep inflation at targeted rate of 8 per cent in the fiscal year to come, as in the outgoing year it stands at 9.5 per cent.

The taxation measure, increasing the standard rate from 16 to 17 per cent, would fuel the inflation in the country. Prices of all food and other commodities would enhance in the country owing to the increase in GST. The govt would generate Rs 40 billion by increasing the rate of GST in the next financial year 2013-14. Inflation would remain at eight percent against the target of 9.5 per cent during the next financial year. However, the annual plan 2013-14 stated that in order to contain the price increase within the targeted level the government would take several measures including increasing the production of the real sector through ensuring adequate supply of critical inputs like energy, improved extension services, agricultural and industrial credits and trade liberalisation.

The plan further stated that the government borrowing from state bank of Pakistan and large liquidity injections by the SBP to maintain the liquidity position will cause inflation. Therefore, borrowing from SBP needs to be minimised in order to contain inflationary pressure.