ISLAMABAD, Aug 2: Oil prices will remain unchanged for some time to curb inflationary trends and at the same time the government would improve the supply side to cut food inflation, says Prime Minister’s Adviser on Finance Dr Salman Shah. Talking to Dawn he said that international oil prices were expected to further go down that would help the government to control inflation that averaged 9.3 per cent as measured by the Consumer Price Index (CPI) in 2004-05 against 3.9 per cent of 2003-04.

“In fact this inflation has started experiencing downward trends that are currently hovering at 7-8 per cent and the government is taking various measures to further bring it down in 2006-07”, the adviser said.

He said despite continued increase in international oil prices, the government avoided to have its upward revision. The prices of food items, Dr Salman said, were also coming down due to certain improvement in supply and demand situation. Food inflation was recorded at 12.8 per cent in 2004-05 against 4.5 per cent in 2003-04.

The sharp upturn in inflationary trend was earlier due to demand pressure on the one hand and supply shocks on the other, he said adding that three years of strong economic growth in succession had given rise to the income levels of various segments of society.

He was of the view that the rising levels of income had strengthened domestic demand which contributed to the rise in inflationary pressure. Dr Salman said the government was trying to ease out demand pressure through monetary policy and improving the situation of food items, either through raising their production or through imports. “And these measures will certainly help lower general price level in the country”, he said adding that the decision of the government to allow the import of food items including live animals will contribute to reduction in prices.

Responding to a question, he said that the government had allowed the duty free import of sugar which was largely expected to reduce the prices of the commodity. “Now every one can import duty free sugar”, he said adding that the import of sufficient sugar stocks would bring its prices down soon.

Answering another question, he said that a strategy of regular monitoring of domestic stocks of key commodities and their prices was helping to maintain price level. Due to this monitoring the government was able to respond in a timely manner to shortages by importing substantial quantities of essential commodities to augment supplies, he added.

He pointed out that one of the reasons for increased inflation had been the demand pressure generated by rising level of economic activity, which started easing when the central bank began to tighten monetary policy aggressively lately.