ISLAMABAD: Pakistan is expecting increase in interest rate that will add in inflation in the country with the help of increase in the Brent towering over $93 in international market.
With Brent currently hovering at $92.34 and WTI being traded for $88.99, the high oil prices in global market thanks to the production cuts introduced by Saudi Arabia and Russia means Pakistan is expected to experience another substantial hike in fuel prices which are already touching the record-high levels.
But it isn’t just the global prices as the devaluation means Pakistan spends more on imports, thus fuelling inflation which means increase in the cost of living, reducing purchasing power, deteriorating quality of life and igniting the food security crisis.
There are different estimates but the most conservative predictions suggest a Rs10 per litre hike for petrol with the higher figures 16.
Similarly, the expected increase in the case of high speed diesel (HSD) is from Rs13 to Rs16 while the kerosene and light diesel oil may get costlier by up to Rs10 and Rs4.50 by after the government will announce new rates for the next fortnight Friday (September 15).
Although the rupee has strengthened in recent days with official exchange rate standing on Rs298.82 on Wednesday, the rising oil prices in global market means negligible positive gains are nullified.
But the different taxes and levies imposed to enhance revenue collection won’t allow decrease as the government is following the strict conditions set by the International Monetary Fund (IMF).
On the latest possible hike would coincide with the looming rate hike by the State Bank of Pakistan (SBP) which has been following monetary tightening policy as suggested by the IMF – resulting in a devastating combination of record-high inflation and interest rate which have crippled the economy.
In this connection, the SBP’s Monetary Policy Committee is meeting today (Thursday) and is expected to go for another rate hike as rising fuel and energy prices are pushing the inflation up.
Any further rate hike will certainly kill the hopes of economic revival as investors and industrialists are already given up any hope of establishing new or expanding their existing businesses, resulting in lack of employment opportunities.
In fact, the rising cost of doing business has forced many industries and businesses to shut down, triggering a wave of unemployment.
Meanwhile, the latest expected fuel price hike will further increase the transportation cost for individuals and goods, thus pushing the food prices as well.