World oil price decline: country saves $102 million

Following a decline in the international oil prices, the country's oil import payments have scaled down by 102 million dollars in the first month of the current fiscal year giving a breathing space to the State Bank of Pakistan with regard to foreign payments.
The pressure on the country's import bill has also eased due to the world oil price decline from record high of 147 dollars per barrel in July to 106 dollars per barrel in September. As such in the first month of FY09, the country has saved an amount of 102 million dollars under the head of oil import payments.
"Decline in world oil prices will also help the country reduce the widening trade deficit, which has already hit alarming high of 20 billion dollars in FY08," analysts said.
Although, the price of crude oil in the international market has started declining for last two months, some positive impact has also been witnessed in the import payments of July 2008, analysts added. "Oil price in the world market is on decline since July 4 when it stood at 145.29 dollars per barrel. It fell to 125.29 dollars per barrel on August 1, and at present it stands at 104 dollars per barrel," analysts said.
The oil import payments have declined by about 10 percent during July 2008 as compared to June 2008. The SBP balance of payments statistics show that during July 2008 the country paid some 995.741 million dollars under the head of oil payments as compared to 1.097 billion dollars in June 2008.
Although, oil import payments of July 2008 are slightly higher than those of July 2007, in which payments stood at 785.690 million dollars, however economist believe that during the coming months the payments will further ease.
Pakistan saved $264.470 million on the import of petroleum products however, $162 million extra had to be spent on the import of petroleum crude during July 2008 with the import of $544 million and $451 million, respectively. Economists said that during last fiscal year oil payments put an extraordinary burden on the trade deficit and the current account deficit due to the rising oil prices in the international market.
The increasing oil payments forced the central bank utilise the country's foreign exchange reserves for oil and other payments. However, the decline in oil payments will help the SBP maintain reserves. The country's oil import payments surged by 42 percent to 10.496 billion dollars during FY08 as compared to 7.345 billion dollars in FY07 because of the persistent oil price surge in the world market.
Due to high oil prices in the world market, the country spent some 3 billion dollars extra money on oil import. The rising payments also put a negative impact on Pak rupee value, which depreciated by over 20 percent during the last six months to Rs 77 against the dollar.