KARACHI Business and industrial community Saturday outrightly rejected Rs40 per litre hike in petroleum products’ prices in just one month of September which will further squeeze purchasing power of general public, adversely hit industries, transport, exports and agriculture sector.
Pakistan Business Forum (PBF) rejecting the per litre jump in petroleum products’ prices said that though institutions are trying their best to curb the artificial price of dollar and at this point Friday’s increase of 24 rupees per litre was not at all justified move by the Finance Division. In the last few days dollar is on the decline in the open market and we appreciate the commendable efforts of the institutions.
PBF Chief Organiser Chaudhry Ahmad Jawad said at present Rs60 per liter is being charged from the public on per lire already in the name of surcharge. On the other hand, high electricity bills have left the public and the business community in debt.
The business community and the people are currently on the streets challenging the government’s helplessness.
Jawad stressed the need for implementing structural reforms for good governance, curbing unproductive expenditures, expanding the tax base, fostering public-private partnerships, and reallocating resources to critical sectors to stimulate sustainable growth, as the country is facing with daunting economic challenges, posing a serious threat to the viability of the industry, in this regard the role of SIFC is appreciated to shape up the country’s economy at the right direction.
PBF official Jawad further observed that it is imperative to understand that fiscal discipline cannot be achieved and sustained without initiating structural reforms. In the 2023 budget, the government extended substantial subsidies and grants to loss-making entities, which, in turn, are not only failing to make positive contribution but are also incurring significant losses.
“We must maintain fiscal discipline and establish controls to create fiscal space to extend relief to the masses, Saleha said.
Quoting the reports, she said that the budget deficit continues to grow, entangling Pakistan in an unrelenting cycle of debt”.
Even if we exclude the impact of debt servicing, our revenues fall short of covering other expenses, implying that all these are met from borrowed funds. At the close of the fiscal year (FY) 2022-23, Pakistan recorded a budget deficit of Rs6.52 trillion, equivalent to 7.7 percent of the GDP, a slight decrease from the previous year’s 7.9 percent of GDP. However, in absolute figures, the budget deficit surged by a substantial 24 percent, or Rs1.26 trillion, within just one year.
Due to this bleak scenario, the primary balance registered a negative Rs690 billion in FY2023. Encouragingly, Pakistan achieved a noteworthy reduction of Rs1.3 trillion or 67 percent year-on-year in its debt portfolio at the primary balance level during FY2023.
According to the Fiscal Operation report, the primary deficit, which stood at 3.1 percent of GDP in FY2022, was reduced to a more manageable level of 0.8 percent of GDP in FY2023. This improvement has created some fiscal room, and with continued efforts we can attain a primary surplus, representing the fundamental level of financial discipline.
It is encouraging to note that at the consolidated level, the government successfully attained an overall primary surplus of Rs503 billion.
However, by end of the third quarter of FY2023, overall budget’s balance showed a negative figure of Rs3.07 trillion. Yet, in the last quarter of FY2023, primary surplus turned into primary deficit, with latter recording a primary deficit of Rs1.1 trillion.
The budget deficit in last quarter of FY2023 surged to nearly 112 percent of the cumulative figures from July 2022 to March 2023. Pakistan’s budget deficit for the initial nine months amounted to approximately Rs3 trillion, but in Q4 FY23 alone, it registered a substantial increase of Rs3.4 trillion. It’s worth noting that in the latest budget documents released in June 2023, revised estimate for primary deficit in FY23 was Rs421 billion.
However, according to the Ministry of Finance’s recent update, there was a primary balance overrun of Rs690 billion, marking an increase of Rs269 billion, which is 64 percent higher than the revised estimates for FY2023 shared earlier in June of the same year. Contrastingly, according to the budget document from the previous year, a surplus of Rs153 billion was projected.
This highlights the inadequacies in financial planning at ministerial level. PBF President Multan further told many countries are implementing privatisation policies for SOEs, Pakistan remains in debate over the issue without officially announcing any plans for disinvesting in such entities; he added.
Irfan Iqbal Sheikh, President FPCCI, has maintained that the government should have kept the petroleum prices unchanged – given the incrementally consecutive gains of the Pak Rupee against dollar for the last 8 interbank sessions.
The trend is visible for all to see that rupee value will further appreciate in the coming days due to the crackdown on speculative trading by commercial banks and in open & grey markets, he added.
It is pertinent to note that petrol prices have been jacked up massively with effect from September 16th from PKR. 305.36 to PKR. 331.36 per liter, which is 8.5 %, and, for high speed diesel, price has been raised from PKR. 311.84 to PKR. 329.18 per liter; which works out at 5.6 %.
Irfan Iqbal Sheikh stressed that the strengthening rupee must have provided the government reasonable cushion to absorb the recent uptick in international oil prices to avoid the domino effect of the hike in petroleum prices in the prices of all essentials and cost-push inflationary pressures.
The FPCCI President explained that rupee closed at 296.85 for a dollar in the last interbank session of the week, ie, Friday and it reflects more than PKR. 10 to a dollar gain; which touched PKR 307.10 for a dollar on September 5. It is pertinent to note that prominent economists agree that the rupee is still undervalued as compared to real effective exchange rate (REER) and will continue to strengthen if the ongoing regulatory and administrative measures persist.
Irfan Iqbal Sheikh, as President of the apex body, has apprised that FPCCI is under tremendous pressure from the entire business, industry and trade community of Pakistan that the government should be made to realize the multiplier effects of skyrocketing petroleum prices they have to bear vis-à-vis cost of doing business.
He explained that the apex body forewarned the authorities a number of times over the last few months that they need to address the teething problems in the import of the Russian crude, i.e. handling of oil cargoes; adjustments required vis-à-vis refining processes and commercial transactional procedures to settle oil payments.
Nevertheless, the authorities failed to listen to us; else, we would have more Russian crude by now, which is cheaper by a whopping 40 percent as compared to international markets today, he added.
Irfan Iqbal Sheikh added that the apex body appreciates the fact that monetary policy committee (MPC) of the State Bank has maintained the status quo in the key policy rate in its latest meeting; however, trade & industry is looking for a discounted and regionally-competitive export finance scheme (EFS); long-term financing facility (LTFF) and temporary economic refinance facility (TERF) rates to cope up with the economic instability; cost of doing business and restoring competitive equilibrium in its exports.
President Karachi Chamber of Commerce & Industry (KCCI) Mohammad Tariq Yousuf has expressed deep concern over the staggering hike in prices of petroleum products which would further fuel the already skyrocketing inflation, intensify miseries for common man and create serious issues for the industry due to unbearably high cost of doing business.
President KCCI pointed out that it was a matter of grave concerns that petrol has been enhanced by Rs26 per liter and diesel by Rs17.34, resulting in shooting up petrol price to a whopping Rs331.38 per liter and diesel to Rs329.18 per liter which was totally unacceptable as it has become almost impossible run the industries at such a high cost.
This was the fourth consecutive hike in petroleum prices whereas during the tenure of Caretaker government alone, the petrol price has been raised by more than Rs58 per liter, which was going to create a lot of problems for the already ailing economy as the production has been curtailed by many industrial units to a great extent due to high cost, he added.
President KCCI said that the general public was already overburdened because of the recent increase in electricity tariffs which is aggravated by the extraordinary upsurge in petroleum prices, triggering severe anxiety not only amongst the masses but also the business and industrial community.
He opined that keeping in view the economic crises being faced by the country, the government has to take harsh steps in order to generate the required revenue for overcoming expenditures and fulfilling international commitments but instead of taking these steps back-to-back, they should devise some kind of an effective strategy to ensure some sigh of relief to the masses and the industry who will not be able to bear the brunt caused by consecutive price hikes.
Tariq Yousuf stressed that the emerging situation has to be efficiently addressed and handled very carefully otherwise, the rising petroleum prices and electricity tariffs will continue to increase the cost of doing business, which would terribly affect the industrial performance, raise unemployment and open the floodgates of inflation, particularly for the middle and lower segments of the society, besides making the poor poorer due to unbearable inflation.
He said that the increase in petroleum prices will also bring a negative effect on transportation charges of import-exports cargo, electricity fuel adjustment charges, maintenance cost and other expenditures, which would collectively affect the cost of finished goods and make manufacturing & exports sectors uncompetitive in the international market.
He hoped that the government would review the overall inflationary situation and accordingly take steps to somehow ease the burden on common man’s life and the industry as well in the larger interest of the country and the already ailing economy, which would be warmly welcomed by the people belonging to all walks of life.
Massive Jump of Petroleum prices is like an economic misfortune and it is so painful for a common man that survival has become almost impossible for them said Ateeq ur Rehman (economic & financial analyst).
By such raise in petroleum prices, already existing, huge prices of public and goods transport will further shoot up to a greater extent thus increasing the cost of doing business/production, ultimately ballooning the cost of consumer goods, goods of daily uses, vegetables, fruits, pulses, grains, and more importantly the wheat & rice and medicines.
The tremendous rise in petroleum prices, SMEs will be badly affected and will be collapse. Small industries are almost shuttered added Ateeq.
Expensive electricity and petroleum prices have severe impact on production activities of major industries including SMEs, etc.
It will have negative effect on exports and it might lead to a flood of unemployment. Because there will be more “Fuel Cost Adjustments” in already inflated electricity bills.
We understand that the rise in international petroleum prices pushed for towering domestic petrol prices. Government should revisit their decision and reverse it if not full at least half, requested Ateeq.
Copyright Business Recorder, 2023