News Analysis |
The Pakistani people woke up to a nasty New Year’s gift; a petrol price hike bomb. On 31st December 2017, the government of Pakistan announced that the price hike will be in effect from midnight. Speaking to the press, Adviser to Prime Minister on Finance and former Chairman for board of investment, Miftah Ismail said that petrol price has been raised by Rs. 4.06 per litre and now the new price stands at Rs. 81.53 per litre in the market.
The diesel price has been pumped up by Rs. 3.96 per litre and the new rate would be Rs. 89.91 per litre and not to lag behind, kerosene oil prices went up by Rs. 3.79 per litre and its new price would go up to Rs. 64.32 per litre. The price of light diesel has also been increased by Rs. 6.25 per litre and the new price will be Rs. 58.37 per litre.
The beginning of 2018 was marked by retail fuel price changes in many countries with regulated fuel markets but the most significant gasoline price change was observed in Algeria.
Miftah Ismail said that the government has decided to pass on almost 50 percent increase compared to the Oil and Gas Regulatory Authority (OGRA) recommendation, while the remaining 50 percent was absorbed by the government. As if it were a consolation, Mr. Ismail informed that the prices of petroleum products in Pakistan were less than Turkey, Sri Lanka, Bangladesh and India. He said the government slashed down the GST rate on diesel from 30.6 percent to 25.5 percent while the GST rate on light diesel was increased by 6 percent.
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The adviser also offered a comparison of the rates of previous four years with these countries and interestingly throughout these years, tariff in Pakistan has been the lowest. Especially, the rates of petrol were lowest in the said countries. Turkey’s tariff is double than what is prevalent in Pakistan.
The adviser reminded that the price hike in the international market is forcing the government to enhance the rates. “Prime Minister Shahid Khaqan Abbasi has asked the ministry concerned not to transfer the burden of the whole increase to consumers. He discarded the recommendations of Ogra and advised that a major chunk of the raise should be borne by the government,” Miftah said.
In Australia, gasoline prices decreased by 1.3% while the average regional gasoline price of South America remained unchanged compared to the previous week.
“Petrol price in Turkey is at $1.48, in India $1.14, in Bangladesh $1.08 and in Sri Lanka $0.83 per litre while in Pakistan its price is 0.7 per litre,” he added. The adviser said the government did not intend to launch a tax amnesty scheme as it was already implementing amnesty by allowing everyone to bring dollars in the country. He said that in order to discourage hawala/hundi, certain questions were asked on certain upper limit, otherwise there was no problem.
Miftah said the government has no plans to launch any bond in the remaining period of the current fiscal year. However, he did not explain how the government would meet the yawning financing gap in the current fiscal year. To a query, he said the government would not abolish the pension scheme and no such plan is even under consideration at the moment.
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The adviser said that currently the country’s foreign exchange reserves are more than $20 billion. He said exports are increasing and people should have faith in the steps for strengthening the economy of the country. He said Pakistan wouldn’t opt for the IMF programme.
The adviser also offered a comparison of the rates of previous four years with these countries and interestingly throughout these years, tariff in Pakistan has been the lowest.
Finance Secretary Shahid Mehmood, who was also present on the occasion, brushed aside an impression that the government is planning to bring about new salary structure in the manner that the pension system will be abolished subsequently. “No such proposal is under consideration,” he clarified emphatically and ruled out kite-flying in this regard.
Scrutinizing the global market during the past week, the WTI price went above 60 USD per barrel and the Brent oil price reached 66.9 USD per barrel. The crude oil price increase pushed up the retail fuel prices around the world and the world average gasoline price increased to a level of 1.09 USD per liter. The world average diesel price also went up by a cent.
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The European average gasoline price was 1.46 USD per liter marking a 0.5% weekly increase. Gasoline prices also went up by 1.2% in the USA, by 0.9% in Africa, by 0.7% in Asia, and by 0.4% in Canada. In Australia, gasoline prices decreased by 1.3% while the average regional gasoline price of South America remained unchanged compared to the previous week.
To a query, he said the government would not abolish the pension scheme and no such plan is even under consideration at the moment.
Looking at individual countries, the gasoline price changes varied from -2.3% (South Africa) to 17.5% (Algeria). There was a decrease in 13 of the 107 reviewed countries, no change in 54 countries, and an increase in 40 countries. Gasoline prices went down by more than 1% in Finland, Cape Verde, Australia, the Cayman Islands, and South Africa, Gasoline prices increased by more than 3% in the UAE, Algeria, France (and Pakistan).
The beginning of 2018 was marked by retail fuel price changes in many countries with regulated fuel markets but the most significant gasoline price change was observed in Algeria, where the government approved a 17.5% increase of the official annual retail price of gasoline.