Russia’s invasion of Ukraine has sent shockwaves through the world, with oil prices rising from 92 a barrel to 139 a barrel and now to 112. However, due to tensions between Russia and Europe, fears of rising oil prices remain a big concern.
The prime minister of Pakistan had announced a few days ago to reduce the prices of electricity and oil in Pakistan and freeze it till the next budget. In this regard, Energy Minister Hamad Azhar said that the Prime Minister’s package of Rs 5 per unit has been implemented, therefore the price of electricity has not increased. Due to the increase in prices, a new fuel cost adjustment is made in the bill every month.
In February last year, Pakistan received about 2.2 billion, an increase of 2 percent per month. However, the recent dispute between Russia and Ukraine, which has led to skyrocketing prices of oil and other commodities in international markets, could be more painful for oil-importing countries like Pakistan and will require more foreign exchange.
Pakistan is getting oil from Saudi Arabia on late payments which has saved the huge foreign exchange, however, the country’s foreign exchange reserves have been declining since August 2021. Federal Finance Minister Shaukat Tarin says that the price of petrol should be Rs. 240 now as compared to the prices in the world market. However, the government is bearing the burden and has to pay Rs 104 billion every month. The productive capacity of our economy is low.
Before Russia’s invasion of Ukraine, the price of oil in the world market was 92 per barrel, which has risen to 139 and now stands at 112. Oil prices have come down a bit but at the same time, a new diesel crisis is emerging in the country. As oil becomes more expensive, the cost of generating electricity, along with hundreds of other items, is rising, which the government cannot bear. Surprisingly, despite the announcement of a reduction in electricity and oil prices by the prime minister, the prices of essential commodities have not come down but have gone up which is very worrying for the people.
According to economists, after the government withdraws its decision to reduce the price of electricity, the relief given in oil prices will have to be withdrawn as the national exchequer cannot bear the burden and this is also a violation of the agreement with the IMF. The war between Russia and Ukraine has spread unrest in the business community and the ongoing political turmoil in the country has increased uncertainty while investors are panicking.
Experts say prices of imported furnace oil, diesel, gas, and coal are at record levels and are unlikely to fall sharply as many oil-exporting countries are unwilling to co-operate and if the government maintains oil prices in line with its declarations, it will deplete foreign exchange reserves, devalue the rupee further, and the central bank will have to take drastic measures to keep the economy afloat, which will affect the economy and the common man.
