Finance Minister Muhammad Aurangzeb on Tuesday warned that the global energy crisis may last months even after the ceasefire due to damaged infrastructure in the Gulf.
The minister made these remarks while addressing the parliament today. “We are dealing with a crisis at the moment,” said Aurangzeb, while responding to lawmakers’ queries.
Talking about the geopolitical situation, Aurangzeb noted that even if a breakthrough is reached, it will take months for the global energy sector to normalise.
“Even if the cessation is achieved, it will take weeks, even months, to normalise because the energy infrastructure has been targeted and continues to be hit. Therefore, we have to plan,” he said.
Aurangzeb informed the assembly that the government is continuously monitoring the situation, including the rise in pol rates, freight and insurance costs, vessels carrying crude, etc. “We need to move towards building strategic reserves, beyond this crisis,” he said.
The minister said that the government announced subsidies for two-wheelers, four-wheelers and public transport. “The disbursement of these subsidies has already been initiated,” he said.
The finance minister shared that the government has given a subsidy of Rs129 billion on petroleum products.
Aurangzeb said that several countries in the region have begun rationing of fuels. “Even people with deep pockets have already transmitted the price,” he said, citing the example of the UAE, where the price of petrol and diesel has been raised by 30% and 70%, respectively.
He said that, at the moment, Pakistan’s remittances have not yet been impacted. “However, the reality is that roughly 40-50% of Pakistan’s remittances come from the GCC countries. The government is evaluating its elasticity as well, and how it will impact the balance of payment, current account, and inflation,” he said.
Aurangzeb said that the support of the International Monetary Fund (IMF) is crucial.
Unexpected repayment of $3.5 billion UAE loan puts pressure on Pakistani economy
“While we have come into this crisis with a relatively good buffer, both on the external and internal side…. But at this point and time, we require the backstop, which is there as part of the Extended Fund Facility (EFF),” he said.
The minister shared that Pakistan is expected to make Eurobond payments this week, alongside other payments.
Pakistan will return a $3.5 billion loan to the United Arab Emirates this month, with an additional $1.3 billion Eurobond repayment due by June.
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