KARACHI: Government raised the fuel prices by up to 6.45 percent for April, which follows 50bps hike in interest rates and an ongoing currency devaluation cycle; the move has invited severe criticism from business community as well as general public.[the_ad id=”31605″]Engr. Daroo Khan Achakzai, President of the Federation of Pakistan Chamber of Commerce & Industry (FPCCI), expressed serious concern on exorbitant increase of Rs6/litre in the prices of petrol and diesel. “ It will have a multiplier effect on almost all the business activities including cost of transportation – within and inter-city – of raw materials and consumer goods thus further escalating the cost of production of industrial goods and spurring inflationary trend which at present is already 8.2 percent”.
Government subsidises the price of most fuels in the country, but has been cutting those payments in recent months as the incumbent government struggles to contain ballooning government expenditure amid an overall economic slowdown.
FPCCI Chief elaborated that the price of all the food (fruits and vegetables) and kitchen items; construction material; fertilizers; imported goods etc., would be dearer as these goods were supplied to the different cities of the country through diesel based vehicles.
The fuel price hike comes amid spiraling consumer inflation with consumer price inflation (CPI) hitting 8.21 percent last month, the highest level since June 2014. The inflation numbers have been mainly driven by the increasing prices of fuel and food.
President Karachi Chamber of Commerce and Industry (KCCI) Junaid Ismail Makda said, “These are not good signs for the economy. The government does not seem serious in solving the issues of businessmen as such adverse measures such as interest rate hike, fuel price hike and currency devaluation are taken without even consulting the business community.”
Makda said this would further increase cost of doing business, which would directly discourage investment and exports.
It may be mentioned here the price of crude oil in international market in August 2018, when the PTI government assumed the charge, was $75 / barrel, which declined to $66.7/barrel by March 28, 2019.
An analyst at a local brokerage house said the increase in petrol and diesel prices tend to raise inflationary expectations among consumers as almost all sectors are affected by it, because in Pakistan most goods are still transported via road.
Ahsan Mehanti at Arif Habib Commodities said stocks also closed bearish amid thin trade after central bank raised key policy rate by 50bps and government notified surge in fuel prices.