The cash-strapped government of Pakistan is now drilling a massive hole in the pockets of its citizens by increasing prices of petrol and diesel.
The caretaker government late Friday (September 15) increased the prices of petrol and high-speed diesel (HSD) by Rs 26.02 and Rs 17.34 per litre, respectively, to over Rs 330.
This is the second price hike in the last two fortnights since August 15. Fuel prices have increased by a whopping 20 per cent since the caretaker government led by Prime Minister Anwaarul Haq Kakar took over.
“Owing to the increasing trend of petroleum prices in the international market, the government has decided to revise the existing consumer prices of petroleum products,” the finance ministry said in a statement.
Pakistan’s tax regime on fuel
Pakistan currently levies no Goods & Services Tax (GST) on petroleum products but it charges so-called petroleum development levy (PDL) of Rs 60 per litre on petrol and Rs 50 per litre on diesel.
On top of that, the government also charges a customs duty of Rs 20 per litre on petrol and diesel.
Inflation likely to increase
Pakistan’s Dawn reported that the country was expected to be hit by massive inflation as fuel prices continue to soar in a cash-strapped economy.
Since the transport sector of the South Asian nation is powered by high-speed diesel, the price hike will have a highly inflationary impact on the prices of vegetables and other eatables.
Inflation in Pakistan
In August, Pakistan continued to grapple with high inflation, registering a rate of 27.4 per cent, surpassing the target. This was attributed to the challenging reforms required by the IMF for a loan.
Following the narrowly avoided sovereign debt default in July, thanks to a USD 3 billion loan programme from the IMF, Pakistan finds itself on a challenging path to economic recovery under a caretaker administration.
The reforms associated with the bailout, including the relaxation of import restrictions and the removal of subsidies, have already contributed to a soaring annual inflation rate, reaching a historic high of 38.0 per cent in May.
Furthermore, interest rates were raised, and the Pakistani rupee depreciated significantly, dropping by 6.2 per cent last month, according to ARY News. Food inflation also remained high at 38.5 per cent in August, according to data from Pakistan’s statistics department.
