KARACHI: While the world is projected to save over $1.3 trillion from oil price fall, Pakistan has yet to reap the benefit as its oil import bill soared during the first five months of this fiscal year compared to same period last year.

The government’s strategy to benefit from the falling oil prices is not known, but the benefit of low international oil price has partially been passed on to the domestic consumers in the shape of two monthly cuts since Nov 1.

A report of the State Bank issued on Wednesday showed that the country paid a total of $6.69 billion for the import of petroleum products and crude oil during the July-Nov 2014-15. The amount was higher than the import bill of the same period last year which was around $6.43bn.

Since June, oil prices started falling from $115 per barrel to $60 per barrel in the third week of December. The massive cut in the oil prices created a great opportunity for countries like Pakistan, China and India to save foreign exchange, slash oil prices for domestic consumers, and allow the savings to be spent for growth.

The State Bank’s report shows the bill for both petroleum products and crude oil increased despite sharp cut in the oil rates. The country has serious problem of foreign exchange while the falling oil prices produced an opportunity for the government to save the dollars.

“Oil imports constitutes 36 per cent of Pakistan’s total import bill and a 30pc decline in oil prices is likely to result in annual savings of $4bn (1.5pc of GDP),” said a research report issued by Topline Securities.

The decline in oil prices is now more than 40pc indicating that the country could save more than the expectations.

“Cheaper oil should act like a shot of adrenalin to global growth. A $40 price cut shifts some $1.3tr from producers to consumers,” said a recent report of The Economist.

The falling oil price will reduce already-low inflation still further, and so may encourage central bankers towards looser monetary policy.

The Federal Reserve will put off raising interest rates for longer; the European Central Bank will act more boldly to ward off deflation by buying sovereign bonds, said the report.

Inflation in November fell below 4pc in Pakistan, creating an opportunity for the economic managers to allow maximum liquidity to boost the growth.

However, the Central Bank is still cautious despite it reduced the interest rate by 50 basis points last month to 9.5pc. The interest rate is still high while the banks were using most of their liquidity to invest in government papers.

If the government does not stop borrowing from the banks, the benefit of low oil price would be wasted.

Published in Dawn, December 26th, 2014