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Massive fuel hike pushes diesel to Rs520/litre amid IMF pressure and global oil crisis.
Pakistan has witnessed an unprecedented surge in fuel prices, with petrol reaching a historic Rs458 per litre following a sharp increase in government-imposed taxes. The latest revision, announced on Thursday, reflects a Rs137 per litre jump (around 43%), marking one of the steepest hikes in the country’s history.
Petroleum Levy Raised to Record Level.
The primary driver behind the increase is a significant rise in the petroleum levy. The government raised the levy on petrol from Rs106 to Rs161 per litre, adding an extra burden of Rs55 per litre on consumers. This decision was approved by Prime Minister Shehbaz Sharif as part of efforts to generate additional revenue.
Despite relatively smaller increases in global oil prices, domestic rates surged sharply due to this tax adjustment, pushing fuel costs well beyond international trends.
Diesel Price Climbs to Rs520 per Litre
High-speed diesel prices have also skyrocketed, climbing by Rs185 per litre (55%) to reach Rs520 per litre, another all-time high. However, unlike petrol, the government has removed the petroleum levy on diesel while maintaining a Rs2.5 per litre carbon levy along with existing import-related taxes.
IMF Pressure Limits Subsidy Options
The government’s decision comes after unsuccessful negotiations with the International Monetary Fund (IMF), which capped fuel subsidies at Rs152 billion. Authorities were unable to secure additional relief, leaving limited options other than increasing prices.
This development highlights ongoing challenges in managing Pakistan’s fiscal space, as tax shortfalls and unmet revenue targets have restricted the government’s ability to cushion consumers.
Second Major Increase in a Month
This is the second significant fuel price hike within weeks. Earlier, prices had already risen by Rs55 per litre. With the latest revision:
- Petrol prices have surged 63% overall
- Diesel prices have increased by 75% cumulatively
The rapid escalation is placing immense pressure on households and businesses alike.
Global Factors: Oil Crisis and Strait of Hormuz Closure
International developments have also contributed to the spike. Rising tensions following US and Israeli actions against Iran have disrupted energy markets. In response, Iran’s move to restrict access through the Strait of Hormuz has significantly impacted global oil supply.
As a result:
- Petrol prices globally rose by around 6.5%
- Diesel prices surged by nearly 20%
Additionally, disruptions in oil and gas production have intensified the crisis.
Other Fuel Prices Also Increased
The government has also revised prices of other petroleum products:
- Kerosene oil: Increased by Rs34 to Rs468 per litre.
- Light diesel oil: Increased by Rs30 to Rs395 per litre.
These increases will further impact transportation and household energy costs.
Economic Impact on Citizens
The rising fuel costs are expected to have widespread consequences:
- Inflationary pressure on essential goods.
- Increased transportation and logistics costs.
- Higher cost of living for ordinary citizens.
This comes at a time when Pakistan is already facing:
- Highest poverty levels in over a decade.
- Rising income inequality.
- Increasing unemployment.
Criticism Over Government Decisions.
The move has drawn criticism, particularly over the decision to increase petrol taxes to subsidize diesel prices. Critics argue that the burden is being shifted unfairly onto petrol consumers.
Additionally, concerns have been raised about government spending practices. Despite calls for austerity, reports suggest continued use of official vehicles and perks by government officials, raising questions about fiscal discipline.