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| Interim govt jacks up petroleum prices to historic high |
In ISLAMABAD, the caretaker government has raised the prices of petrol by up to Rs20 per litre for the next two weeks due to a surge in global oil rates, marking the highest increase in the country's history.
The Finance Division explained that international petroleum prices have gone up in the last two weeks, which is now affecting consumer prices in Pakistan as well, according to a statement issued on Tuesday night.
The cost of petrol has been raised by Rs17.50 per litre, while high-speed diesel (HSD) has seen an increase of Rs20 per litre.
These new fuel prices will take effect from August 16.
Previous Price (Aug 1) New Price (Aug 16) Change Petrol: 272.95 290.45 +17.50 Diesel: 273.40 293.40 +20
Earlier, on August 1, the previous government led by the Pakistan Democratic Movement (PDM) had declared a substantial increase of Rs19 per litre in the prices of petrol and diesel, attributing it to the escalating global oil prices.
The announcement was initially scheduled for July 31, but new rates were not issued as officials deliberated on maintaining or decreasing the rates, considering the potential impact of the price hike on people already affected by inflation.
Ishaq Dar, who made this announcement as the finance minister for the last time before the government dissolved on August 12, stated that the price hike was unavoidable as Pakistan had agreed with the IMF to implement a petroleum development levy (PDL) on the rates.
This recent fuel price hike is expected to lead to increased inflation in August.
Inflation hit a record 38% in May but the State Bank of Pakistan (SBP) decided to keep the key interest rate unchanged at 22% amid nominal decline in inflation last month.
The Monetary Policy Committee (MPC) particularly noted that year-on-year inflation is likely to remain on a downward path over the next 12 months, which implies a significant level of positive real interest rate.
Years of financial mismanagement, combined with the impact of the COVID-19 pandemic, a global energy crisis, and severe floods that inundated a significant portion of the country last year, have pushed Pakistan's economy to its limits.
However, Islamabad recently struck a $3 billion standby agreement with the International Monetary Fund (IMF) which could offer temporary relief for the country's mounting foreign debt.
This agreement mandates the government to remove several subsidies benefiting the poor. The fuel price hike, in line with the global increase in oil prices, falls within this context.
