Caretaker Prime Minister Anwaar-ul-Haq Kakar’s administration has initiated its tenure with a significant decision, as the interim government has raised the price of petrol by a substantial margin of over Rs17 per litre. This move comes as a response to the recent surge in petroleum prices in the international market over the past two weeks. The Finance Ministry, in announcing the adjustment in consumer prices in Pakistan, stated that the increase in the price of petrol is accompanied by an upward revision in the cost of other petroleum products as well.
As of August 1, the pre-existing price of petrol stood at Rs272.95 per litre, which has now been revised to Rs290.45 per litre, marking a considerable increase of Rs17.50 per litre. Similarly, the price of High-Speed Diesel has undergone a change, rising from Rs273.40 to Rs293.40 per litre, reflecting a substantial increase of Rs20 per litre.
It is worth noting that the former Pakistan Democratic Movement (PDM)-led government had previously announced a substantial hike of Rs19 per litre in petrol and diesel prices on August 1. This increase was attributed to the escalating global oil prices at the time. Although the announcement was scheduled for July 31, officials delayed the release of new rates to carefully assess the potential impact of the price hike on the already inflation-affected population.
This latest adjustment in fuel prices is anticipated to trigger a fresh wave of inflation in the month of August. Notably, inflation had reached a historic peak of 38% in May. In response, the State Bank of Pakistan (SBP) opted to maintain the key interest rate at 22%, considering the marginal decline in inflation observed in the previous month. The Monetary Policy Committee (MPC) has projected a downward trajectory in year-on-year inflation over the next twelve months, indicating a significant positive real interest rate.
The backdrop to this price increase is the culmination of years of financial mismanagement, which has severely strained Pakistan’s economy. This strain has been exacerbated by the global challenges posed by the COVID-19 pandemic, a worldwide energy crisis, and devastating floods that submerged a substantial portion of the nation last year. To address these economic challenges, Islamabad recently secured a $3 billion standby arrangement with the International Monetary Fund (IMF). This agreement, while offering temporary relief for Pakistan’s mounting foreign debt, necessitates the discontinuation of several subsidies that cater to the needs of the less fortunate. The fuel price hike aligns with the global trend of rising oil costs.
