Karachi, August 26, 2023 – Pakistan is on the brink of implementing a second round of price increases for petroleum products in the first half of September 2023.
This impending decision is a direct consequence of the persistent depreciation of the Pakistani Rupee (PKR) against the US dollar, an issue that has continued since the last adjustment in petroleum prices on August 15, 2023.
Currency Crisis and Its Consequences
The imminent price hike, scheduled for August 31, 2023, is heavily influenced by the alarming devaluation of the Pakistani Rupee (PKR) against the US dollar. The PKR has witnessed a staggering depreciation, weakening by PKR 9.49 to hit an all-time low of PKR 301 against the dollar on August 25, 2023. This sharp decline, from PKR 291.51 on August 15, 2023, in the interbank foreign exchange market, has raised significant concerns about the sustainability of current petroleum prices.
Import Dependency and Economic Pressure
Pakistan, a net importer of petroleum products, relies heavily on these imports to meet its domestic energy demands. Despite the high cost of petroleum products negatively impacting local demand, the country still imported energy products worth $791 million in July 2023, compared to $1.44 billion in the same month of the previous year. This import dependency places added pressure on the government to manage price adjustments in line with global market fluctuations.
Challenges for the Interim Government
The upcoming revision in petroleum prices presents a formidable challenge for the interim government, especially given the nation’s struggle with mounting inflation. The last price revision on August 15, 2023, under the caretaker government, saw substantial increases in the prices of petrol and High-Speed Diesel (HSD).
In a surprising move, the interim government had announced a significant hike in petroleum rates effective from August 16, 2023. Petrol prices surged by Rs 17.50 per liter, reaching Rs 290.45 per liter from the previous Rs 272.95 per liter. Similarly, the cost of high-speed diesel (HSD) skyrocketed by Rs 20 per liter, propelling it to Rs 293.40 from Rs 273.40 per liter.
Uncertain Road Ahead
Given the ongoing freefall in the rupee’s value against the dollar, an increase in petroleum prices now seems inevitable. These developments compound the concerns of Pakistani citizens already grappling with economic uncertainties. The government faces the unenviable task of striking a delicate balance between managing the currency crisis and ensuring that the cost of living remains bearable for its citizens. In the coming days, the nation will closely watch how the government addresses these pressing issues and navigates through these challenging times.
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