In view of the fluctuation in global oil prices, the government on Saturday announced an increase of up to Rs 4 per liter in prices of all petroleum products. The new prices will be effective for a period of one month starting from October 1 (yesterday), according to a statement issued by the Ministry of Finance.
The Prime Minister approved an increase of Rs 2 each in the prices of petrol, the HSD, and the LDO, while the price of kerosene oil is increased by Rs 4 per litre. The price of petrol now stands at Rs 73.50 per litre; of the HSD Rs 79.40 per litre, the LDO Rs 46 per litre and kerosene oil Rs 48 per litre.
In the past couple of years – following a plunge in global crude oil prices – the government has burdened petroleum consumers with heavy taxes, especially on petrol and the HSD, which are widely used in small and heavy vehicles as well as in agriculture sector. Consumers in Pakistan have been paying up to 38% more on oil purchase compared with prices prevailing in the international market in order to make up for the shortfall in government revenues.
This comes as the last week saw a decline of 0.8% in the Pakistani stock exchange known as KSE-100 as political uncertainty and dwindling economic prospects played havoc. Gross foreign exchange reserves built up by borrowing heavily during the IMF programme are still over $14bn, worth three months of import cover, but speculation has flared up due to underlying weakness in foreign exchange earnings and rising foreign exchange liabilities.
T Rowe Price, a global investment management firm which had classified Pakistan as “an emerging market” in May 2017 to the mirth of government supporters has removed the country from the same designation
Reserves are gradually declining now, partly due to steadily declining exports, ballooning consumer goods imports and imports of investment goods for the China Pakistan Economic Corridor (CPEC). A burgeoning debt service, which is already 29 percent of export earnings, is adding to the burden.
But the largest losses in reserves in recent months have resulted from central bank intervention to defend the untenable exchange rate of the rupee. All in all, the bad news has continued to pour in for the Pakistani economy. T. Rowe Price, a global investment management firm which had classified Pakistan as “an emerging market” in May 2017 to the mirth of government supporters has removed the country from the same designation.
All in all, while the government will certainly try to shift the blame onto the accountability drive against its founder and former Pakistani Prime Minister Nawaz Sharif who had promised an “economic explosion” at the start of his third and now the last term, the economic experts are adamant it is his administration’s policies which are to be blame.
Consumers in Pakistan have been paying up to 38% more on oil purchase compared with prices prevailing in the international market in order to make up for the shortfall in government revenues
Nawaz Sharif has the ‘honor’ of being the ruler of Pakistan with the highest number of loans during his rather short-lived tenure. This can be ascertained by his hailing of IMF loans being “historic” and “good news” for the country. The continuing weakness in the balance of payments is a legacy of the weak IMF programme and flawed economic priorities of Nawaz Sharif’s government under finance minister Ishaq Dar.
However, there is a ray of hope in the form of the China Pakistan Economic Corridor, a project that can potentially rejuvenate Pakistan’s staggering economy. However, there too are factors at play such as the lack of an Industrial infrastructure that is hampering further Chinese investment.