Why petrol prices have reached an all-time high in cash-strapped Pakistan
Pakistan is facing one of its worst economic crises. Now it has increased the price of petrol and diesel by Rs 35 per litre, as it looks to secure the next tranche of the IMF bailout package. For citizens already struggling with inflation, this comes as another jolt
All is not well in Pakistan. It’s facing an unprecedented economic crisis. Last week, its currency plummeted to its lowest – Rs 255.43 – against the US dollar and now the nation has announced a steep hike in prices of petrol and diesel.
The Pakistan government increased the price of fuel on Sunday by Rs 35. After the hike, petrol would cost Rs 249.80 per litre (local currency), high-speed diesel Rs 262.80 per litre, kerosene oil Rs 189.83 per litre and light diesel oil Rs 187 per litre. This came as a shocker for its citizens already hit by inflation.
Govt announced new prices of Petroleum Products with effect from 11.00 hrs, 29 Jan ,2023.
High Speed Diesel-Rs 262.80 per litre
MS Petrol —Rs 249.80 per litre
Kerosene Oil -Rs 189.83 per litre
Light Diesel Oil – Rs 187 per litre
— Ministry of Finance (@FinMinistryPak) January 29, 2023
Why did Pakistan increase fuel prices?
“The Pakistani rupee saw devaluation last week... and now we are seeing an 11 per cent increase in the prices of petroleum products in the international market,” Finance Minister Ishaq Dar said in a televised address.
Dar said that despite international prices and the rupee devaluation “on directions of Prime Minister Shehbaz Sharif, we have decided to increase the minimum price of these four products,” according to a report in Dawn. He said that in the last four months, there was no increase in petrol prices. “In fact, the prices of diesel and kerosene oil were decreased,” he told the newspaper.
The finance minister said that prices were hiked on the recommendation of the oil and gas regulatory authority “who said there were reports of artificial shortages and hoarding of fuel in anticipation of price rises”. The step was taken to combat this.
According to Dar, rumours of an increase in the cost of gasoline and diesel by Rs 50 led to an artificial shortage in the market.
Also read: Pakistan rupee plummets to record low. What happens next in the crisis-hit nation?
What about the IMF bailout?
Under the Imran Khan administration, Pakistan was placed into a $6 billion International Monetary Fund (IMF) programme in 2019, which was increased to $7 billion in 2022. The cash-strapped nation needs to complete the ninth review and the government and the IMF are negotiating a release of $1.18 billion.
From 31 January to 9 February, an IMF team will visit Islamabad to consult with government representatives about the implementation of the criteria that are linked to the aid package.
Measures to meet the IMF conditions include increasing fuel and energy prices and raising taxes.
In June last year, Pakistan increased prices of all petroleum products by about Rs 14 to Rs 19 per litre to meet the pre-conditions set by the IMF.
So will taxes be increased?
Yes, most likely. According to media reports, the Pakistan government has prepared two draft ordinances to impose Rs 200 billion in new taxes, days after it accepted IMF demands to resume a stalled loan programme.
The government is also considering discontinuing the power sector subsidy and imposing sales tax on raw materials for the export sector, especially textile industrialists, reports Dawn. It further added that more hikes in electricity and gas tariffs are also on the agenda.
Also read: Pakistan’s crippling economic crisis: Is the country going the Sri Lanka way?
What is the Opposition saying?
Pakistan Tehreek-e-Insaf (PTI) chairperson and former prime minister Imran Khan slammed the petrol price hike, saying that the total mismanagement of the economy by the “imported government crushed the masses and salaried class”.
“Electricity and gas price hike and 35% unprecedented inflation expected with Rs200bn mini-budget,” he wrote on Twitter.
Total mismanagement of our economy by a corrupt & incompetent imported govt has crushed masses & salaried class with latest hike in petrol & diesel prices & Rs33/$ devaluation to Rs262.6/$. Elec & gas price hike & 35% unprecedented inflation expected with Rs200bn mini budget.
— Imran Khan (@ImranKhanPTI) January 29, 2023
Chaudhary Parvez Elahi, a leader for Pakistan Muslim League (Quaid e Azam), an ally of PTI, said that Dar raised petrol prices by Rs 35 per litre to give a “gift” to Maryam Nawaz on her return from London. “The credit for increasing petrol prices goes to Nawaz Sharif and Maryam Nawaz,” he said, adding that the monster of inflation had gone out of control, while the Pakistan Muslim League (Nawaz) government was busy victimising PTI and PML-Q leaders.
What’s the plight of the common man in Pakistan?
The headline inflation in Pakistan double from 12.3 per cent in December 2021 to 24.5 per cent in December 2022.
This has caused an increase in food prices. The food inflation rate has almost tripled – it was 11.7 per cent in December 2021 and 32.7 per cent in December 2022. Prices of onions, chicken, salt and pulses are skyrocketing.
Last week, large parts of Pakistan witnessed a massive power outage, even as electricity bills have almost doubled over the last year and a half.
According to a report in Dawn, the situation is so dire that many salaried-class people have to take up multiple jobs and have been forced to cut down three meals to two.
“I make Rs 29,000 a month and my monthly grocery costs at least Rs25,000. I need 60 kg flour and 8k g ghee every month, while expenses like education are secondary when basic food needs can’t be fulfilled. In such extreme circumstances my family has had to skip a meal and we only have two meals a day now,” Muhammad Shahzad, a technical employee with a media organisation, told Dawn.
“If I was earning Rs 30,000 a month 10 years ago, I was comfortable, but now even Rs 150,000 a month from two jobs feels less because of the rates of essential items increasing rapidly... My biggest expense is petrol because even if one of the schools I work in is five minutes away from home, I can’t walk to it because of safety concerns… Public transport is also highly costly because of mounting petrol prices,” Sana Ali, a teacher, said, according to the newspaper.
With inputs from agencies
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