Karachi, April 17, 2024 – The Federation of Pakistan Chambers of Commerce and Industry (FPCCI) has called upon the government to slash petroleum prices in light of recent developments easing tensions in the Middle East region.
FPCCI President Atif Ikram Sheikh emphasized the need for the government to maintain stability in petroleum prices, especially given the decline in international oil prices and the relative calm observed in West Asia following the resolution of the Iran-Israel conflict. Sheikh highlighted that international oil prices have seen a decline of $1 per barrel, alongside reduced economic and trade activities contributing to demand destruction.
Sheikh noted that recent trends indicate a stable rupee-dollar parity in the coming weeks, bolstered by Pakistan’s completion of the IMF-SBA program and the forthcoming long-term IMF-EFF program. Additionally, Saudi Arabia’s decision to bolster Pakistan’s foreign exchange reserves by $2 billion further strengthens the country’s economic outlook.
Despite these positive indicators, Sheikh criticized the recent hike in petroleum prices, with petrol rising by PKR 4.53 per liter and high-speed diesel (HSD) climbing by PKR 8.14 per liter, effective from April 16th. He highlighted that this increase comes on the heels of a previous hike of PKR 9.66 per liter imposed just two weeks earlier, resulting in a cumulative 5 percent increase in petrol prices over a short span.
Sheikh stressed that the government should absorb minor fluctuations in international oil prices to prevent cascading effects on essential commodities and mitigate inflationary pressures. He cited economists who argue that the rupee remains undervalued compared to the real effective exchange rate (REER), suggesting potential for further appreciation if favorable external financing indicators persist.
The FPCCI president revealed the mounting pressure from the business, industry, and trade community on the government to address the adverse impacts of increased petroleum prices on the cost of doing business. He lamented the government’s failure to address issues related to the import of Russian crude oil, which could offer substantial cost savings of 30-35 percent compared to international markets.
Saquib Fayyaz Magoon, Senior Vice President of FPCCI, echoed the organization’s stance, pointing out a decline in core inflation to 12.8 percent and headline inflation to 20.7 percent in March 2024, the lowest figures in 22 months. Magoon emphasized the urgent need to reduce the key policy rate and implement regionally-competitive export finance schemes and long-term financing facilities to support exporters.
As FPCCI continues to advocate for measures to alleviate economic pressures on businesses and consumers, the government faces growing calls to address the impact of petroleum price fluctuations on the broader economy and pursue policies conducive to sustainable growth and development.
