March 29, 2023
Economy Pakistan

Pakistan Raises Petrol and Gas Prices by 113% to Secure IMF Loan Tranche

Pakistan’s government has implemented a drastic increase in petrol and gas prices by 113%, reaching a historic high, to secure a crucial tranche of the International Monetary Fund (IMF) loan. The price hike, which took effect on 16th February, was one of the preconditions set by the IMF to revive the $7 billion extended fund facility (EFF), along with new fiscal measures undertaken through the ‘mini-budget.’

Petrol prices have surged by PKR 22.20 per litre to appease the IMF, while gas prices have increased by 16% to 113% for various sectors, including domestic consumers. This move was in line with the recent Pakistan Oil and Gas Regulatory Authority (OGRA) notification.

Following the hike, petrol will cost PKR 272 per litre, while high-speed diesel (HSD) will sell for PKR 280 per litre in the financially strapped country. Kerosene and light diesel oil will be sold for PKR 202.73 per litre and PKR 196.68 per litre, respectively.

The Economic Coordination Committee (ECC) of the Federal Cabinet approved the gas price hike for domestic consumers on 13th February, classified into 12 categories of protected and unprotected consumers. On 15th February, Pakistan presented a supplementary finance bill to parliament proposing to increase the goods and services tax (GST) to 18% from 17% to raise an additional PKR 170 billion ($639 million) in revenue for the fiscal year ending in July.

The finance minister’s bill proposed to exempt daily use items, such as wheat, rice, milk, and meat, from the GST rise to reduce the budget’s impact on the most vulnerable to rising inflation. Nevertheless, experts predict that inflation is likely to rise in Pakistan after the petrol price rise and the mini-budget, which aims to reduce the budget deficit and broaden the government’s tax collection net.

Fahad Rauf, head of research at Ismail Iqbal Securities, a local brokerage, stated that the only positive outcome of the finance bill was that it brought Pakistan one step closer to resuming the IMF program. Rauf criticized the government for increasing indirect taxation and burdening existing taxpayers, while failing to collect income tax from retailers, real estate, and agriculture sectors.

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