The government has reduced the prices of petroleum products – apparently to ensure that the benefit of the appreciation of the Pakistani rupee against the US dollar is passed on to consumers. However, this small decrease is unlikely to have any impact on rising inflation. Petrol and diesel prices contribute only a little to overall inflation. In neighbouring India, petrol prices are much higher than that in Pakistan, but the rate of inflation is significantly low.
Instead of lowering the prices of petroleum products, the government could have considered different options for taking the advantage of the rupee gain. These options may include hedging in the futures market, reducing the yawning budget deficit, curtailing the Rs2 trillion circular debt, investing in new development projects to generate employment and providing incentives to exporters. Our policymakers must make decisions on a purely economic basis.
Arif Majeed
Karachi
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