Pakistan is expected to reduce petroleum prices for the first half of May 2023, as international oil prices have declined and the exchange rate has remained stagnant during the ongoing fortnight.
The revision of petroleum prices takes place every two weeks in Pakistan, and the next revision is scheduled for April 30, 2023, with the new prices taking effect from May 01, 2023.
READ MORE: Headline inflation in Pakistan to hit historic high at 36.5% in April 2023
Over the past year, international oil prices have decreased significantly, while fuel prices in domestic markets have risen by more than 100 percent. For example, the price of diesel has increased by 102.84 percent, while petrol has increased by 81.17 percent, according to the Sensitive Price Indicator (SPI) based inflation report released by PBS.
READ MORE: Pakistan’s foreign exchange reserves improve to over $10 billion: SBP
The depreciation of the Pakistani rupee against the US dollar is another major factor contributing to the surge in petroleum prices in domestic markets. The local currency has fallen by 52.47 percent to PKR 283.47 to the dollar by April 20, 2023, compared to PKR 185.92 on the same day a year ago.
Despite the recent decline in international oil prices, experts believe that the government may not be able to reduce local prices due to the depreciation of the rupee and the need to generate revenue. As a net importer of petroleum products to meet local demand, any change in exchange rates and international oil prices can impact domestic prices.
READ MORE: Unlocking foreign flows critical for Pakistan: PSX
Although the government increased petroleum prices on April 15, 2023, for the second half of the ongoing month, citing an increase in international oil prices and exchange rate variation, it has assured the public that it is working on a scheme to provide petroleum products at subsidized rates to lower-income groups. Various suggestions are under consideration, such as using the Benazir Income Support Program (BISP) network, issuing specific subsidy cards, or generating a one-time password (OTP) for eligible citizens’ ease.
In conclusion, the expected reduction in petroleum prices for the first half of May 2023 in Pakistan will provide some relief to the general public. However, the government will have to consider a long-term plan to control fuel prices, considering the impact of international oil prices and exchange rates on domestic markets.
