Fuel Price Hike Unavoidable Amid Global Oil Shock, Pakistan Faces Inflationary Fallout

(MENAFN- IANS) New Delhi, April 5 (IANS) Pakistan’s sharp increase in domestic petrol and diesel prices is being seen as an unavoidable response to rising global oil costs triggered by the ongoing US-Israel conflict with Iran, even as the move is expected to intensify inflationary pressures across the economy, a report has said.

The Pakistan government recently raised petrol prices steeply before rolling back Rs 80 within 24 hours, after an earlier increase of Rs 137 had pushed rates to Rs 458 per litre, according to Dawn report.

The abrupt revision has pointed to political pressure and a degree of confusion within official circles over how to manage the crisis.

Alongside the price adjustments, authorities have introduced energy conservation measures, including early market closures, and announced targeted subsidies for vulnerable groups such as motorcycle owners, farmers and transporters.

However, officials had for weeks resisted passing on the full impact of higher international oil prices, instead absorbing the cost within the budget.

That approach proved costly. Following an earlier hike of Rs 55 per litre nearly a month ago, policymakers appeared to be banking on a quick resolution to tensions in the Gulf region.

The delay in adjusting prices is estimated to have cost the national exchequer around Rs 129 billion, leaving limited fiscal space to continue subsidies.

Analysts said the latest move highlights Pakistan’s limited capacity to cushion fuel price shocks.

Weak tax revenue mobilisation and rising public expenditure have constrained the government’s ability to absorb external pressures without risking macroeconomic stability.

The strain is also evident on the external front. Higher oil prices are increasing the import bill, threatening to erode foreign exchange reserves and put pressure on the exchange rate, which has only recently stabilised after a prolonged period of volatility.

For consumers, the impact has been immediate. Transport fares have already increased, freight charges have risen sharply, and businesses are passing on higher costs, setting off a broader inflationary ripple effect across the economy.

The burden is expected to fall most heavily on low- and middle-income households already grappling with persistent price pressures, the report said.

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