Pakistan recently increased petrol and diesel prices due to soaring global oil costs linked to the US-Israel conflict with Iran. The government initially raised prices significantly but later rolled back part of the increase after facing political pressure and confusion on crisis management. To address the situation, authorities have implemented energy-saving measures, like early market closures, and announced subsidies for vulnerable groups such as motorcycle owners, farmers, and transporters.
The delay in adjusting fuel prices has strained the national budget, costing around Rs 129 billion and limiting the government’s fiscal space for subsidies. This move underscores Pakistan’s challenge in managing fuel price shocks and the impact of weak tax revenue and rising public expenditure on macroeconomic stability. The surge in oil prices is also affecting the country’s import bill, foreign exchange reserves, and exchange rate stability, leading to immediate effects like increased transport fares and higher business costs.
The rise in fuel prices is expected to disproportionately affect low- and middle-income households already facing financial pressures, exacerbating inflationary trends across the economy.
