Govt Fixes Petrol and Diesel Above PKR 100 per litre, Era of Lower Inflation Ends?

Islamabad (Business Reporter): Finance Ministry announced new petrol and diesel prices as both products are now fixed above PKR 100 per litre. FI predicted yesterday that petroleum prices are likely to go up in the next month.

Finance Ministry said Petrol price is increased by PKR 25.58 per litre and new price is now PKR 100.10 per litre. Diesel price is jacked up by PKR 21.31 to PKR 101.46 per litre.

Petroleum marketing companies were not happy with the sharp decline in the petrol prices last month. Pakistan witnessed oil shortage just after huge reduction in the petroleum prices.

Nadeem Babar, who held the portfolio of Petroleum Division, also took a controversial decision in March. He imposed immediate ban on the import of oil although prices in the international market were falling fast. His directives to resume oil import came at a time when international market was already recovering from the April’s crash.

Impact on Inflation

Decline in the oil prices pushed inflation down during the last three months. And this had helped State Bank to reduce interest rate. SBP has reduced interest rate by 6.25 per cent since mid-March. On June 25, SBP announced a cut of 100 basis points in the interest rate and fixed new rate at 7 per cent.

However, government’s decision to increase diesel prices by more than PKR 21 per litre will have direct impact on the prices of many commodities. House basket is likely to witnesses an inflationary pressure in the coming weeks, said an analyst. Some Bankers told FI this week that inflation may rebound in the coming weeks due to expected rise in the petrol and diesel prices and wheat crises.

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