The government increased petroleum prices twice last week. Each time the per liter rate was raised by PKR 30, which means, in totality, there was an increase of PKR 60 in one week. This is the highest ever increment in fuel prices since Pakistan got freedom from the British Empire in 1947.
After an increase of PKR 60, the new per liter price of petroleum products is as under:
- Petrol PKR 209.86
- Diesel PKR 204.15
- Kerosene oil PKR 181.94
In the different parts of the country, people have reacted strongly and condemned the government’s decision. Exchange of punitive and harsh words, clashes, and conflicts were observed and reported on petrol pumps during this episode.
In any country, petroleum products are considered the backbone of the economy, industry, transport, and energy sector. Any augmentation in petroleum prices is directly linked with inflation; this is the reason as petroleum prices climbed to new heights there was also fluctuation in electricity prices. The National Electric Power Regulatory Authority (NEPRA) has approved an increase in the basic electricity tariff up to PKR 7.91 per unit. According to NEPRA, before the rise, the average tariff set by NEPRA was PKR 16.91, while the new national average electricity tariff has been increased to PKR 24.82 per unit. The main reason for the increase in electricity tariff is the depreciation of the local currency, the increase in capacity cost, and the price of fuel in the world market.
This swell in fuel prices also affected the transportation sector in the country. The All Pakistan Public Transport Owners Federation has decided to increase fares by 20% in response to the rise in prices of petroleum products. A spokesman for the All Pakistan Public Transport Owners Federation told Eat News that if the price of diesel goes up any more, the federation will reduce its services by 50 percent and there will be a decrease and cut in the staff associated with this sector. “We cannot survive in this situation; we have to wind up the business of transport. Our workers will stop their services and they will protest against unpopular decisions made by the current government. It has become impossible for transporters to drive”, the spokesman added.
Keeping in view the new wave of inflation, Eat News team conducted a general survey in the different markets of Islamabad and its twin city Rawalpindi. People shared that life was already difficult in Pakistan but with the current decisions it is almost impossible to live an honorable and respectful life.
Noor Elahi has a small grocery store in the suburban area of Islamabad. When EAT News asked the question about his daily sale, he replied, “People have nothing in their pockets to purchase anything, usually, people purchase small daily food items throughout the month and pay me back on the first of the month (when they receive their salaries). But something strange happened in the first week of June. People are coming to my shop with excuses; they cannot pay the complete bill as they have some other expenditures. It is directly affecting my income, I am afraid, I will not be able to meet my expenditures as my sales are dropping down and people are not capable of paying small debts”.
Rustam Shah is 38 years old fruit seller from KP province, currently holding a fruit shop at Faizabad (the junction point of Capital Islamabad and its twin city Rawalpindi). During the exchange of words with EAT News, he said Inflation is moving with rocket speed, while income is reducing day by day. “I often go to the fruit market at dawn, each day I go with hope but return with disappointment, fruit rates are escalating like anything. I face harsh comments from customers who complain about the price hike, but if I will purchase anything expensive, how can I sell at cheaper rates”, Rustam Shah argued.
Sami Khan, 25, a young laborer, is attached to a private construction project. He said he came to the capital from a remote area of Pakistan. The prime purpose of this shift was to earn bread and butter for his family. “I work 8 to 10 hours in scorching heat throughout the day, due to high temperature my skin tone has faded, but at the end of the day, whatever I receive, it is not a huge amount; besides this purchasing power of local currency is also dropping down. I am not able to send money to my family living back in my native town”, Sami Khan told EAT News.
Nazia Bibi sells mobile phone accessories on a wooden cart. She is working because with her husband’s salary, they are not capable of nursing their children properly. Nazia told EAT News, “it is difficult for me to work in harsh weather conditions, I have a small investment, which means my sales and profit is not huge. Sometimes it happens that I sit for hours and no customer visits my cart but I have to wait for the customers patiently to generate income for my children and my family. I am frightened about the next generation’s future in Pakistan”.
The government has also admitted that inflation is at its highest level in the history of Pakistan, but due to tight terms and conditions of the IMF program, they (the government) do not have any other choice except to increase the taxes, fuel, gas and electricity prices.
In a statement, Prime Minister Shahbaz Sharif said, “Inflation in the country is skyrocketing and so is unemployment. When it is the matter of increase in petrol price, we took the decision with a heavy heart. People are crushed by inflation and poor families are crying, they do not have money for medicine and treatment”.
On the issues like increase in fuel prices and purchase of cheap Russian oil, EAT News reached out to Federal Finance Minister Miftah Ismail and questioned him about government strategy, he replied, “We have talked about buying wheat from Russia, the previous PTI government talked about oil to buy from Russia but I think Russia is under sanctions they have not responded letter written to them by to previous PTI government. We have actually asked either Ukraine or Russia, whichever country can sell us wheat, we would be happy to buy the wheat. Russia never offered us oil and now it is under sanctions so it is difficult for me to imagine buying Russian oil in these circumstances. If Russia will offer us oil at cheaper rates and if there were no sanctions on Pakistan we will consider it and for sure buy Russian oil. I think it will not be possible for Pakistani banks to open LCs (letters of credits) or to arrange LCs to buy Russian oil”.
Prime Minister Mr. Shahbaz Sharif, while speaking to international media shared his planning on how to tackle this economic crunch. He said “our goal is to eradicate poverty in the country, hitches and glitches cannot be solved in a short period of time. Problems of the weaker segments of society are being solved on a priority basis. A common man is under lots of pressure including inflation, it has become difficult for them to live a normal life. The government is also facing lots of financial challenges”.
In this prevailing poor economic situation, former Prime Minister Imran Khan has called for a peaceful protest against inflation. In his statement, Imran Khan said, “peaceful protest should be held against the government. Due to government policies, inflation has put the people in trouble. The government destroyed the country’s economy”.
Imran Khan said that despite the pressure during Corona, their government gave an economic package of PKR 1200 billion; in the first quarter of 2022 (during the PTI regime), their government had reduced the sales tax to zero percent. “We have also given a subsidy of PKR 466 billion to the public in the energy sector”, Imran Khan said in a statement.
The current economic situation not only affects the country internally but on the international level, it is being monitored. Moody’s – an American business and financial services company- has downgraded Pakistan’s outlook from positive to negative (B3 Ranked) by saying that the situation of local and foreign currency is unstable. According to Moody’s, Pakistan’s ranking has been downgraded due to external economic risks which are deteriorating due to inflation, current account deficit, increased pressure on the currency, and at the same time, the economic future looks uncertain due to political risks. According to Moody’s, the resumption of the IMF program is ambiguous, and foreign financing is also clouded by uncertainty. This year, Pakistan’s GDP is expected to be 4.5 to 5 percent, current account deficit is expected to be 3.5 to 4 percent, due to the political situation, there are difficulties in implementing the IMF terms and conditions.
In the current situation, Prime Minister Shahbaz Sharif announced strict measures for austerity. The PM has decided to reduce the limit of free petrol available to members of the federal cabinet and government officials.
Economists believe that these measures are not enough, big and tough decisions will have to be taken up on an immediate basis. Measures like those made during the Corona epidemic will be needed; luxuries and market hours will be reduced to save electricity. If immediate measures won’t be taken, people will be on the streets which will result in chaos and anarchy in the country.
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