- Govt to explore ways to absorb part of any further increase in oil bill.
- Also seeking flexibility on petroleum-related taxation from IMF.
- Passing full impact of oil prices to consumers to trigger inflation.
ISLAMABAD: The government is weighing a set of financial and policy options to prevent further increases in petroleum prices if global oil rates continue to surge amid the expanding regional conflict following the US-Israel attack on Iran, an official source said on Monday.
Prime Minister Shehbaz Sharif in a televised address on Monday, warned that the region had been gripped by conflict and acknowledged that international crude prices had already jumped sharply, forcing the government to make difficult decisions, including a recent increase of Rs55 per litre in petrol and diesel prices.
He, however, indicated that in case the global oil price further goes up, the government would try not to shift the burden onto the people.
When approached, a well-placed official source said the government would explore ways to absorb part of any further increase in the global oil bill to avoid passing the entire burden on the consumers.
He said, one option could be diverting a portion of the federal development budget to finance the additional cost of oil imports if international prices continue to rise.
The move would allow the government to cushion the impact on domestic fuel prices at a time when inflationary pressures remain high.
Another option being examined is approaching the International Monetary Fund to seek flexibility on petroleum-related taxation, particularly the petroleum levy and other charges imposed on fuel.
The source familiar with the discussions within the government said the government could argue that the current spike in oil prices is the result of war that is beyond Pakistan’s control. Without some relief in taxes, they warned, passing the full impact of global oil prices to consumers could push petrol prices to unprecedented levels.
Such a scenario, they said, could trigger a fresh wave of inflation, increase transport and production costs and further strain the fragile economy.
Policymakers were particularly concerned that a steep rise in fuel prices could have a cascading effect on the prices of essential commodities and undermine economic stability. What has already been passed on the people — Rs55 per litre raise in petrol and diesel price — is already too much for the people.
In his address, the prime minister said the government was fully aware of the burden higher fuel prices place on ordinary citizens.
“The increase in petroleum prices was a difficult decision taken with a heavy heart,” he said, adding that while economic realities forced the government’s hand, it remained mindful of the impact on the poor.
Official sources said the government would continue monitoring global oil markets and the evolving regional situation. They added that the government’s priority was to ensure uninterrupted fuel supplies while trying to minimise the economic impact on the public.
Originally published in The News
