ISLAMABAD, Aug 27: The government is working out a strategy to deal with rising international oil prices and the issue of increasing domestic oil prices in the next fortnight or keeping them unchanged is likely to be finalised next week.
Official sources told Dawn that the government was more worried about diesel, which is imported on a larger scale, and there was no option for the ministry of petroleum and natural resources but to propose an increase in domestic oil prices.
They said the government had already suffered a revenue loss of Rs65 billion by not fully passing on the burden of increased oil prices to the people since May 2004. Sources said the future strategy was being finalised also keeping in view the political consequences with regard to new oil price increases.
“We are examining the issue of increasing oil prices and, hopefully, it will be decided next week,” said a senior official of the ministry of petroleum.
When contacted, he said that international prices had touched $65 a barrel and nobody could predict whether these prices would go up further or start declining in future. Therefore, he said, the government was constrained to revise upward domestic oil prices.
Another senior official said the government had no control over international oil prices, which continue to rise because of one reason or the other. “To the maximum possible we can protect our people but beyond that everyone will have to share the burden of increased oil prices,” he said.
In response to a question, he said that the trade deficit had been increasing due to higher oil imports and higher import of machinery and equipment. However, he said the trade deficit was likely to be around $4 billion during the current financial year as was witnessed in 2004-05.
He said the government was not worried about the trade gap but current account deficit which created problems and was currently 1.6 per cent of GDP and such was not a matter of concern.
“There has been 37 per cent increase in the import of machinery and equipment worth $18 billion besides continued increase in oil prices and this has increased inflation,” he said. He expressed hope that the government would achieve 8 per cent inflation target set for 2005-06.
“This would be achieved by lowering our imports,” he said, adding that beyond a certain point, increasing imports could hurt the economy of the country and would be discouraged by the government.
However, he warned that the government may face difficulties in achieving 8 per cent inflation target in case there was a new support price announced on account of wheat or cotton.
