After the latest increase in petrol prices, the government moved to pacify the public on Friday, with Finance Minister Shaukat Tarin saying that the rates have gone up due to the rise in global costs of the commodity, stressing that the centre was absorbing much of the impact by reducing the petroleum levy.

Addressing a press conference in Islamabad on Friday, alongside Minister of State for Information and Broadcasting, Farrukh Habib, Tarin said that the Covid-19 pandemic had triggered a global price hike, and since Pakistan was importer of some essential commodities it was impacted as well.

The statement comes after the public reacted to the hike in petrol prices that are now sitting at their highest level. The price of petrol was raised by Rs4 per litre or 3.2 percent, taking it to Rs127.3. The price of High Speed Diesel (HSD) was increased by Rs2 per litre or 1.6 percent. The rate of Kerosene Oil (SKO) was up by Rs7.05 and Light Diesel Oil's increased by Rs8.82 per litre or 9.7 percent.

Petrol prices have been consistently increasing in Pakistan as the government reacts to the global increase in rates that have almost doubled in the past one year, according to data from Bloomberg.

POL products’ prices increased

Tarin said that despite the global hike, the government has not passed on the entire impact to the people, adding that the reduction in Petroleum Levy has been used to provide relief. "The government had to bear an additional burden of Rs2 billion (because of this)."

"The levy stood Rs30 per liter in 2018, which at present stands at Rs 2.5 per liter."

Comparison with regional economies

The finance minister also drew a comparison with regional economies, stressing that despite the latest hike, prices in Pakistan are "still lower" than the others.

"Majority of the other 16 countries that have lower prices than Pakistan are oil-producing countries."

Comparing rates with neighboring countries, Tarin said that petrol was being sold at Rs127 per litre in Pakistan whereas its price in India was Rs235 and in Bangladesh it was Rs195.

"The government budgeted Rs600 billion from the petroleum levy, and this could be affected. (But) The prime minister wanted to provide relief to the people."

To a question regarding upcoming talks with the International Monetary Fund (IMF) to be held on October 4, the minister said that the government would "sincerely negotiate".

Tax revenues

Tarin said that the government has pledged to collect tax revenues of Rs5.8 trillion and the collection numbers till date show that the target would be exceeded.

He said there were certain challenges faced in the power sector, but Tarin expressed that increasing tariff rates, as advised by the IMF, "was not a solution to the issue, so we would like IMF to provide space in this matter".

External and agriculture sector

Tarin said that Pakistan’s debt-to-GDP ratio came down by 4% last year, expecting that it would come further down during FY22.

Meanwhile, the finance minister lamented that no proper attention was given to the agricultural sector for the last three decades and, as a result, Pakistan has become a net importer of food items including wheat, sugar, pulses and ghee, and was being directly affected by world inflation.

He said the cost of wheat in the country is Rs 2,040 per maund, however, the prime minister has directed to decrease it to 1,950.

"The government had to buy sugar at higher rates, but it would be available around Rs90 per kilogram. Likewise, ghee prices that witnessed around 80-90% rise in the international market, and was available at Rs350 in Pakistan, would come down to below Rs 300 per kilo."

He said that the government would also provide direct food subsidy to 12.5 million families, which constitute around 44 percent of total population from October. The subsidy would be provided on flour, sugar, ghee, and pulses.

He said the government was also developing a mechanism to eliminate role of middle man, which as per the federal minister was one of the major causes of food inflation.

Talking about tax collection, Tarin said that the economy was growing as revenues have witnessed a growth of 38% during the 1QFY22, exceeding the target by Rs186 billion.

“This means the economy is growing,” he said.