Karachi, September 16, 2023 – Pakistan’s business community has voiced its disappointment following the recent increase in petroleum prices, effective as of September 16, 2023.
Irfan Iqbal Sheikh, President of the Federation of Pakistan Chambers of Commerce and Industry (FPCCI), expressed his concerns, asserting that the government should have refrained from raising petroleum prices, given the consistent strengthening of the Pakistani Rupee against the US Dollar in recent interbank sessions. Sheikh emphasized that this trend, which has been evident to all, indicates a further appreciation of the Rupee in the near future. This optimism is fueled by the crackdown on speculative trading by commercial banks and in open and grey markets.
Petroleum prices saw a significant surge on September 16th, with petrol prices jumping from PKR 305.36 to PKR 331.36 per liter, an increase of 8.5%. High-speed diesel prices also rose, going from PKR 311.84 to PKR 329.18 per liter, reflecting a 5.6% hike.
Sheikh stressed that the strengthening Rupee should have provided the government with a reasonable cushion to absorb the recent uptick in international oil prices, thereby averting the domino effect of higher petroleum prices on essential goods and cost-push inflationary pressures.
FPCCI highlighted that in the last interbank session of the week, the Rupee closed at 296.85 for a US Dollar, indicating a gain of over PKR 10 against the Dollar. This is a significant improvement compared to the PKR 307.10 per Dollar exchange rate observed on September 5th. Leading economists concur that the Rupee remains undervalued when compared to the real effective exchange rate (REER), and its strengthening is likely to continue with ongoing regulatory and administrative measures.
Irfan Iqbal Sheikh, as President of FPCCI, shared that the entire business, industry, and trade community of Pakistan has exerted immense pressure on the government to recognize the multiplier effects of soaring petroleum prices on the cost of doing business. FPCCI has repeatedly warned authorities over the past few months about addressing issues in the import of Russian crude, including oil cargo handling, refining processes, and commercial transactional procedures for oil payments. Unfortunately, these warnings went unheeded, leaving Pakistan without the opportunity to benefit from significantly cheaper Russian crude, which currently stands at 40% less than international market prices.
Sheikh added that FPCCI acknowledges the State Bank’s decision to maintain the status quo in the key policy rate during its latest monetary policy committee (MPC) meeting. However, the trade and industry sectors are eagerly anticipating a discounted and regionally-competitive export finance scheme (EFS), long-term financing facility (LTFF), and temporary economic refinance facility (TERF) rates to address economic instability, mitigate the cost of doing business, and restore competitive equilibrium in the export sector.