The Pakistani government on Thursday announced a massive hike in consumer fuel prices, the second such increase in a month, as the economic ripple effects of the ongoing U.S.-Iran conflict take a heavy toll on the nation’s stability.
The price of high-speed diesel has been raised by a staggering 54.9%, to 520.35 rupees ($1.88) per litre. Similarly, petrol prices have risen 42.7%, to 458.40 rupees per litre.
War and the Strait of Hormuz
Pakistan’s Petroleum Minister Ali Pervaiz Malik appeared in a televised press conference and spoke about the volatility in international markets. Pakistan is heavily dependent on oil imports from Saudi Arabia and the UAE (and in particular, on the strategic Strait of Hormuz) and the worsening conflict has led to unsustainable levels of subsidy.
It was inevitable to raise the prices due to the international market prices going out of control after the U.S.-Iran war, Malik said, and yet the government had already provided 129 billion rupees in subsidies in the past three weeks but could no longer afford a "blanket subsidy" with no end to the war in sight.
The conflict, according to Prime Minister Shehbaz Sharif, has hit the Pakistani economy “hard” and said diplomatic efforts are going on to persuade Washington and Tehran to come to the negotiating table.
Targeted Relief and Economic Fallout. To mitigate the impact on the most vulnerable sectors, Finance Minister Muhammad Aurangzeb announced targeted subsidies. These are aimed at:
- Small-scale farmers
- Motorcyclists
- Intercity transportation of goods and passengers
But the hike will cause a fresh wave of inflation to hit an already poor population already struggling to keep up with the cost of living.
Aviation Sector Hit Hard
The fuel crisis has had a profound impact on the aviation sector. According to ARY News, domestic airline fares have risen by PKR 2,800 to PKR 5,000 for big routes like Karachi to Lahore and Islamabad.
International travel has also seen drastic hikes, with prices going up from PKR 10,000 up to PKR 28,000. Flights to the Middle East and Central Asia have gone up by PKR 15,000 on average, reflecting the high cost of jet fuel.
