THE record single-day increase in petrol prices, preceded by massive currency depreciation, signifies the culmination of the bad economic policies that Finance Minister Ishaq Dar has been pursuing for the last four months to impart a misplaced sense of relief to the public. At the end of the day, he has failed — miserably — to protect the people, the rupee and the political capital of his party. The hike of Rs35 a litre in petrol prices, along with a similar increase in diesel rates and the Rs18 rise in light diesel oil and kerosene, was unavoidable due to the exchange rate depreciation. But this is just the beginning. Fuel prices will again be adjusted in the middle of next month to incorporate the impact of further deterioration in the exchange rate as well as rising global oil prices. If negotiations with the IMF have to succeed, the government will also have to implement a 17pc sales tax on petroleum products, pushing their prices to new highs over the next one month. That the latest increase in fuel prices was announced three days before schedule because the owners had started shutting down their pumps in anticipation of a huge hike also exposed the chinks in the government’s ability to establish its writ.
What does the fuel price increase mean for Pakistanis, most of whom are poor even by the standards of low-income countries? The prices of essential food and other items have already gone through the roof and are far beyond the reach of the average Pakistani. A report in this paper says that white-collar workers are forced to do multiple jobs to make ends meet, as well as cut their food, education and healthcare expenses to cope with surging inflation. Those slightly better off are shifting from cars to two-wheelers to ensure their families are fed. Pakistan’s Great Depression is already here. And no one knows how long it will continue, or how deep the economy reeling from devastating floods, intense political divisions and runaway price inflation in an uncertain global environment will sink before the rot starts to be reversed. It is time the government admitted to its reckless exchange rate and energy pricing policies. Had Mr Dar not been managing the exchange rate and reducing fuel prices for political capital, the situation would not have been so desperate.
Published in Dawn, January 31st, 2023