KARACHI: Low oil prices on the international market helped Pakistan save around $2.5 billion in imports of petroleum products during the first four months (July to October) of this fiscal year, according to a latest report of the State Bank of Pakistan (SBP).

This means the country would be able to save around $7.5bn this fiscal year if the current oil prices prevail.

Import bill of petroleum products plunged by 43 per cent to $3.263bn during the four months from $5.733bn a year ago, the report said.

Oil prices have been falling for more than 18 months, but FY15 ending on June 30 did not reflect any significant change. Since June 2014 to June 2015, oil prices dropped by over 50pc in the international market but Pakistan’s import bill did not reflect a significant decline.

World oil prices have now plummeted to below $50 a barrel from around $115 in mid-2014. On Thursday, Brent oil prices were close to $46 a barrel while US crude was just under $43.

During FY15, the import bill of the petroleum products was $12.155bn, a decline of only $2.6bn compared to the preceding year. The decline in the bill should be around $7bn.

However, the current oil import bill would be encouraging for the government. Possible savings of $7.5bn during the fiscal year would be much bigger than the expectations as the government has been borrowing recklessly from the international markets and donors to keep foreign exchange reserves at $20bn.

The finance minister said in Karachi on Friday that the country has record reserves and it is a sign of stability. However, he also said recently that the present government has borrowed about $18bn during two-and-a-half years.

The big saving is also very significant as the recent Eurobond issue by the government could only raise $500 million, and that too at a high rate of 8.25pc. The selling was widely criticised, particularly in the presence of record forex reserves.

The government argues that it needs more borrowing for debt-servicing which would increase from 2016. Debt-servicing was $6.99bn in FY14, but dropped to $5.417bn in FY15.

“If the government succeeds to save about $7bn through oil import bill, the reserves could be maintained at the current level while exchange rate would remain stable with slight fluctuations,” said Atif Ahmed, a currency expert in the inter-bank market.

Recently, the finance minister has said that the government would put a check on import of luxuries that has been a cause of widening trade deficit.

Increased imports, like that of food, in FY15 ate up the benefit of low oil prices. Food imports jumped to $4.624bn during 2014-15 from $3.913bn in 2012-13, an increase of $1.7bn in two years.

Published in Dawn, November 29th, 2015