Pakistan Likely to Raise Petroleum Levy to Rs 100 per Liter

Pakistan Likely to Raise Petroleum Levy to Rs 100 per Liter

Islamabad, May 26, 2024 – Pakistan is poised to increase the petroleum levy to Rs 100 per liter, a significant hike from the current Rs 60 per liter in the budget 2024-25.

This potential change comes as the government explores strategies to bolster its revenue without resorting to a new carbon tax.

Research analysts at Arif Habib Limited highlighted in a recent report that the government is considering either a carbon tax or an incremental petroleum levy. Given the fiscal pressures and the need to generate substantial revenue, increasing the petroleum levy appears to be the favored option.

The analysts noted that the International Monetary Fund (IMF) had advised the Pakistani government to reintroduce a general sales tax (GST) at 18 percent on petroleum products. However, the government is inclined towards escalating the petroleum levy as a more feasible alternative. “The government is contemplating increasing the petroleum levy from Rs 60 per liter to Rs 100 per liter,” the analysts stated in their report.

This measure aims to bridge the revenue gap and ensure that the government meets its financial targets. According to estimates provided by the researchers, the additional Rs 40 per liter levy is projected to generate an impressive Rs 691 billion in revenue.

The proposal to increase the petroleum levy is part of a broader strategy to address fiscal challenges and comply with international financial recommendations. By enhancing the levy, the government seeks to avoid the political and economic complications that might arise from reintroducing the GST on petroleum products.

The anticipated increase in the petroleum levy has sparked discussions among stakeholders, with concerns about its potential impact on inflation and the cost of living. The transportation sector, in particular, is likely to feel the immediate effects of this increase, as fuel costs directly influence logistics and freight charges.

As the government deliberates on this significant policy shift, it faces the challenge of balancing revenue generation with economic stability. The decision will likely be scrutinized for its impact on the broader economy and the everyday lives of Pakistani citizens.

In the coming weeks, further details and official confirmations are expected as the government finalizes its fiscal strategies for the forthcoming budget. The proposed hike in the petroleum levy stands as a testament to Pakistan’s ongoing efforts to navigate its economic landscape amidst global financial pressures.