Pakistan saved $6 billion in 18 months from reduced POL prices

 ISLAMABAD: In the aftermath of massive nosedive of POL prices in international market, Pakistan saved $6 billion during last one and half years period, helping Islamabad to build up foreign currency reserves and avoiding balance of payment crisis over the medium term.

“Alone in first half (July-Dec) period of the current fiscal year 2015-16, Islamabad has saved $3.3 billion after witnessing POL prices falling below $30 per barrel in international market,” official data available with The News reveals.

With massive gains, Pakistan is heading towards a situation on economic front where it will seriously consider saying ‘goodbye’ to the IMF after expiry of existing Extended Fund Facility (EFF) of $6.4 billion by September 2016.

“In view of political reasons, the PML-N-led government will prefer to come out of the IMF programme as spending spiral will get momentum during last period of the incumbent government’s tenure in 2017 and 2018,” said the sources and added that it was known fact that Pakistan would have to go back to the IMF during caretaker government or after winning elections by any political party in 2018 elections because of resumption of due repayments on external front to the IMF obligations.

Despite decline to boost up exports, the reduced oil bill aswell as increased remittances really helped Islamabad for evaporating risks on external accounts. This available space needed to be utilised to remove structural problems becoming stumbling block in the way of fetching exports earnings in a big way. On fiscal side, the reduced oil prices helped the economic managers to scale down subsidies massively, providing breathing space to cut down the budget deficit in line with the IMF programme. Pakistan had managed budget deficit at 5.37 percent of GDP in last fiscal while it was eyeing to restrict it at 4.3 percent of GDP by end June 2016. So far the budget deficit stands within the envisaged target in first half of the ongoing financial year.

According to official data compiled by the State Bank of Pakistan as well as Pakistan Bureau of Statistics, the country saved $2.7 billion on account of reduced import bill because of decreased POL prices in international market during last financial year 2014-15. “In last 18 months, Pakistan’s total saving stood at $6 billion that helped for building up foreign currency reserves and providing breathing space to the economic managers,” said the official.

The sources also pointed out certain complexities that needed to be addressed such as oil imports in Pakistan stood at 62 million barrels in fiscal year 2007-08 when the POL prices peaked at international level. However, in fiscal year 2014-15, the oil import stood at 48.607 million barrels while it was hovering in the range of 25.201 million barrels in first half of the current fiscal year.

When the prices of POL products decreased massively in international market then why the consumption requirement decreased in domestic market despite the fact that the CNG was available in 2007-08 while it’s almost abandoned in the largest province of Punjab.

The average price per barrel in 2014-15 stood at $84.314, while it reduced to $58.577 in first six months of the current fiscal year 2015-16.