Pakistan raised prices of petrol and gas by a massive 113 per cent to a historic high in a bid to secure the critical International Monetary Fund (IMF) loan tranche. Petrol prices have been jacked up by Rs 22.20 per litre in a bid to appease the IMF for reviving the $7 billion extended fund facility (EFF). Gas prices have been hiked from 16 per cent to 113 per cent for different sectors including domestic consumers, according to a recent Pakistan Oil and Gas Regulatory Authority (OGRA) notification.
After this hike, petrol cost PKR 272 per litre whereas high-speed diesel (HSD) will sell for PKR 280 per litre in the cash-strapped nation. Kerosene and light diesel oil, on the other hand, will sell for PKR 202.73 per litre and PKR 196.68 per litre respectively. The hike in petrol and gas prices came into effect on February 16 Petrol and gas price hikes were one of the preconditions of the IMF coupled with the new fiscal measures undertaken through the ‘mini-budget’. Inflation is expected to rise in Pakistan after the petrol price rise and the mini-budget. The mini-budget is aimed at reducing the budget deficit and broadening the government’s tax collection net.
The increase comes after the Economic Coordination Committee (ECC) of the Federal Cabinet approved the summary for hiking the gas price by 112 per cent for domestic consumers, classified into 12 categories of protected and unprotected consumers, on February 13. The Federal Board of Revenue (FBR) issued an SRO which led to an increase in the standard 17 per cent general sales tax (GST) to 18 per cent to raise $639 million in extra revenue during the fiscal year ending in July this year.
Commenting on this development, head of research at a local brokerage Ismail Iqbal Securities Fahad Rauf was quoted as saying by news agency Reuters, “It’s unfortunate that we only know how to increase indirect taxation, and burden the existing taxpayers.” He added, “On the other hand, there is no income tax collection from retailers, real estate, and agriculture segments.”