Pakistan hikes petrol, diesel prices by PKR 35/liter amid crisis
What's the story
Pakistan announced a whopping PKR 35/liter price hike on petrol and diesel on Sunday, Reuters reported. The development came after its currency plummeted last week after currency exchange price caps were lifted. Pakistan's Finance Ministry announced the fuel price hike amid an unprecedented economic crisis and days ahead of a visit by an International Monetary Fund (IMF) team to review its existing financing program.
Context
Why does this story matter?
Several crisis-stricken countries seeking aid from the IMF are reportedly facing pressure to relax their economies and let market forces determine exchange rates. Pakistan's depleting forex reserve has triggered food inflation in the country amid a severe cash crunch. It secured a $6 billion bailout from the IMF in 2019. However, the recent installment of $1.1 billion has been stalled since November 2022.
Statement
Pakistan Finance Minister Ishaq Dar's announcement
In a televised address, Pakistan's Finance Minister Ishaq Dar announced they were hiking the petrol and diesel prices by PKR 35/liter. "The price of kerosene oil and light diesel oil has been increased by PKR 18," he said, adding the hike would help dispel rumors about fuel shortage and reduce fuel hoarding. The new prices came into effect at 11:00 am (PST) on Sunday.
Details
No fuel shortage in Pakistan: Dar
Dar also claimed that there was no fuel shortage in the country, contrary to rumors being spread on social media, per Dawn. He said the price hike decision was taken based on the oil and gas regulator's recommendations. Petrol will now be sold at PKR 249.80/liter, high-speed diesel at PKR 262.80/liter, light diesel at PKR 187/liter, and kerosene oil at PKR 189.83/liter in Pakistan.
Facts
Prices of essential commodities on rise too
According to Business Today, the prices of essential commodities have also seen a sudden spike in Pakistan. The onion price in the country has reportedly reached PKR 220-250 per kilogram, marking a 500% price rise within a year. The rates of rice, pulses, and wheat have also seen an increase. The situation amid inflation has led to food shortages as well.
Twitter Post
Total mismanagement of economy: Former Pakistan PM Imran Khan
Total mismanagement of our economy by a corrupt & incompetent imported govt has crushed masses & salaried class with latest hike in petrol & diesel prices & Rs33/$ devaluation to Rs262.6/$. Elec & gas price hike & 35% unprecedented inflation expected with Rs200bn mini budget.
— Imran Khan (@ImranKhanPTI) January 29, 2023
Reason
Pakistan's currency hit all-time low on Thursday
The main reason for the increase in prices in Pakistan is the weakening of its currency, Al Jazeera reported. On Thursday, the Pakistani rupee slumped to a record low of PKR 255.43, plunging PKR 24.54 against the US dollar. Notably, this was the currency's largest decline since the new exchange rate system was introduced in 1999.
Crisis
Status of the economic crisis in Pakistan
Foreign debt has been increasing in Pakistan, which has resulted in an economic crisis and an inflation rise. Pakistan may not be able to import basic goods such as wheat soon as it has less than three weeks' worth of import cover in forex reserves. Food and medicines are being held at seaports as payments aren't being cleared. The 2022 floods worsened the situation.
Power crisis
Major cities in Pakistan faced power breakdown
Three weeks after Pakistani authorities ordered all markets, restaurants, and malls to close early as part of an emergency energy conservation strategy, major cities like Karachi and Lahore, among others, faced massive power outages owing to grid failure last week. As per reports, Pakistan has enough power-producing capacity to fulfill demand but lacks the resources to run its oil-and-gas-fired facilities.