File photo. Asif Hassan—AFP
The federal government on Wednesday notified a fuel price hike—taking costs to a record high—in a bid to revive a stalled International Monetary Fund (IMF) bailout that requires the country to remove all untargeted subsidies.
According to a notification issued by the Finance Division, the “increase in price is due to the devaluation of the Pakistani rupee.” It said the new prices would be effective from Feb. 16 and would be reviewed after a fortnight.
Petrol prices, per the notification, have been raised from Rs. 249.8/liter to Rs. 272/liter, an increase of Rs. 22.2. That tariff of high-speed diesel, meanwhile, has been hiked from Rs. 262.8/liter to Rs. 280/liter, an increase of Rs. 17.2/liter. The price of kerosene has been raised from Rs. 189.83/liter to Rs. 202.73/liter, while light-diesel oil has been raised from Rs. 187/liter to Rs. 196.68/liter.
The Pakistani rupee has declined by nearly 40 rupee against the U.S. dollar over the past month following the government’s removal of an artificial cap on the local currency and reverting to a market-based exchange rate. At the same time, Islamabad is struggling to revive a stalled IMF program that requires the government to pass on the full impact of international prices onto consumers to curtail the circular debt.
The fuel price hike, warn observers, would likely boost inflation in the country, which is also reeling from the impact of a “mini-budget” unveiled by the government that seeks to generate Rs. 170 billion in revenue from additional taxation measures. Among the policies announced by Finance Minister Ishaq Dar are an increase to the general sales tax; higher taxes on “luxury” products; and a hike to the federal excise duty of cigarettes, cement and other commodities.