Pakistan economic crisis: Petrol, diesel price hiked by up to PKR35 as currency value plummets

Pakistan economic crisis: Petrol, diesel price hiked by up to PKR35 as currency value plummets

NEW DELHI: As Pakistan inches closer to an economic collapse, the Shehbaz Sharif government on Sunday added to the burden of its inflation-stricken citizens when it hiked petrol and diesel prices by PKR 35 a litre.
“We have decided to increase the price of petrol and diesel by Rs 35. The price of kerosene oil and light diesel oil has been increased by Rs18,” said finance minister Ishaq Dar. Diesel will now cost Rs 262.80 per litre, petrol Rs 249.80 per litre, kerosene Rs 189.83 per litre, and light diesel Rs 187 per litre.

The decision comes ahead of a visit by an International Monetary Fund (IMF) team to discuss the stalled ninth review of the country’s current funding programme.
Last week, the Pakistani rupee lost close to 12% of its value after the removal of price caps that were imposed by the government but which were opposed by the IMF. On Friday, Pakistan’s currency depreciated to its lowest against the US dollar at 262.6 rupees.

Petrol stations across Pakistan are quickly running dry due to reduced supplies by oil marketing companies. Even Islamabad now regularly sees serpentine lines of vehicles at filling stations. The rise in oil prices has been accompanied by a skyrocketing increase in prices of basic as well as imported goods.
A World Bank report has revealed that an alarming six million people in Pakistan are currently experiencing acute food insecurity. The number may increase to 8.5 million between September and December.
Meanwhile, hospitals in the country are running short of medicines, and there may soon be shortages of essential goods such as fertilisers.
The country is facing a 28% inflation rate and the breakdown of the supply chain may cause hyperinflation. This could be in addition to more imported inflation due to steep currency devaluation.

Meanwhile, the State Bank of Pakistan has just US$4.4 billion in forex reserves, barely enough for three weeks of imports. Recently, the central bank increased its benchmark interest rate to 17%, the highest in more than 24 years.

Experts have warned that if the country is not bailed out soon, Islamabad could go bankrupt.

Finance minister Ishaq Dar said on Sunday that the price hike was recommended by oil and gas authorities due to the higher cost of buying energy in the global market. “We will have to take the rise in international oil prices and the devaluation of the rupee into account,” he said.
Pakistan is in the midst of a balance of payments crisis and the plummeting value of the Pakistani rupee will push up the price of imported goods. Energy comprises a large part of Pakistan’s import bill.
A successful IMF visit is critical for Pakistan, which is facing desperate to secure external financing, with less than three weeks’ worth of import cover in its foreign exchange reserves.
Former prime minister Imran Khan criticised the price hike, saying that the “total mismanagement” of the economy by the “imported government” has “crushed the masses and salaried class”.
“Electricity and gas price hike and 35% unprecedented inflation expected with PKR200 billion mini-budget,” tweeted Khan, the chairman of the Pakistan Tehreek-e-Insaaf Party.
Former finance minister Asad Umar said that the public was already fed up with inflation as he termed the government’s move as “punishment” for the people.
(With inputs from agencies)

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