Pakistan’s Caretaker PM aims to combat soaring inflation through fuel price reductions
Published on: October 17, 2023.
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The Pakistani government is taking steps to combat inflation by implementing fuel price cuts and a price-control mechanism, according to caretaker Prime Minister Anwaar ul Haq Kakar. This move comes as the country strives for economic recovery under a caretaker government, following a $3 billion loan programme from the International Monetary Fund. The loan programme helped Pakistan avoid a sovereign debt default but imposed conditions that complicated efforts to control inflation.
Kakar took to X (formerly known as Twitter) to announce the initiative, stating, “Consequent to substantial reduction in fuel prices, I have directed the concerned authorities at Federal and Provincial level to activate a strict price control mechanism.” He emphasized the importance of ensuring that the benefits of the price cuts on commodities are passed on to consumers.
As of Monday, the price of petrol has been reduced by 40 Pakistani rupees to 283.38 rupees per litre, while high-speed diesel now costs 303.18 rupees per litre. The Ministry of Finance attributed these price cuts to the decreasing trend of petroleum prices in the international market and the appreciation of the rupee against the U.S. dollar.
The inflation rate in Pakistan rose to 31.4% year-on-year in September, up from 27.4% in August, primarily due to high fuel and energy prices. However, analysts believe that these fuel price cuts may have limited effectiveness in curbing inflation. Amreen Soorani, Head of Research at JS Global Capital, explained that the cut in fuel prices is a result of factors such as international prices and rupee parity, and its sustainability depends on future fluctuations in these factors. Soorani also suggested that efforts to combat illicit trade have contributed to the appreciating rupee, and continuing these efforts could stabilize the currency.
Fahad Rauf, Head of Research at Ismail Iqbal Securities, noted that prices tend to rise more significantly when fuel prices increase compared to when they decrease. He emphasized that consumers may not benefit from the full extent of the price cuts.
In the midst of these economic factors, analysts have also identified the ongoing conflict between Hamas and Israel as a significant geopolitical risk to oil markets. ANZ research stated that the oil price may warrant a risk premium of $5-10 per barrel due to supply risks.
Source: [Hindustan Times](https://www.hindustantimes.com)
