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Exchange loss likely to deprive masses benefit in petrol price cut

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  • Govt to announce petrol price today for next fortnight.
  • Exchange loss adjustment to rob consumers of petrol price cut.
  • Current exchange rate is heavily tilted in favour of the dollar.

KARACHI: Due to a sharp rise in the value of the dollar in the last two weeks, the masses may not get any benefit in the prices of petroleum products, according to a The News report.

The report said that the price of diesel is reflecting an Rs34/litre decrease for the next fortnight. The government is scheduled to review the price of petroleum products today.

The international price of crude oil has come down, which can be translated into a major cut in domestic prices of petroleum products, but only if the government passes on the full impact to the end consumers.

However, sources in the oil sector believe that the government would not pass on the full impact of the reduction in the international prices on exchange losses accumulated over the months, which had put the oil sector in a financial crunch.

The government may be deterred to pass on the impact to end consumers, as the oil sector would be in deep financial trouble if their losses are not adjusted on account of sharp exchange rate fluctuations in the past many months.

Diesel price

Oil sector sources told the publication that the ex-refinery price of diesel is showing Rs34/litre decrease for the next fortnight. However, the exchange losses on diesel go over Rs100/litre, which needs to be adjusted.

Sources said that the government may pass on some relief by cutting the diesel price by Rs15 to 20 per litre for the consumers while adjusting the remaining exchange losses.

Sources, however, felt that this was a ripe time for the government to adjust whatever remained of exchange loss adjustment.

The fall in crude prices gave the government enough fiscal space to accommodate the oil companies, which have been facing financial problems as they were not receiving the full amount of exchange losses.

Petrol price

As far as petrol is concerned, its price is showing Rs13-14 per litre decline on the basis of its ex-refinery price in the next fortnight.

Again the exchange loss adjustment may deprive the consumers of the benefit of price reduction and the government may only pass on Rs4-5 relief while adjusting the remaining amount.

Exchange rate

The present exchange rate is heavily tilted in the favour of the dollar. It is a huge hurdle for the government, in terms of reducing the prices of petroleum products in the domestic market.

According to the oil industry estimates, the average exchange rate calculated for the next fortnight is Rs283 to determine the price of the ex-refinery.

Pakistan’s oil sector has repeatedly requested the government in many letters to resolve the exchange losses issue, with few players in the industry pleading to make it more fair and transparent.

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In a first for history, PSX crosses the 77,000 milestone.

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At 77,213.31, the benchmark KSE-100 hit an all-time high, up 1,005.15, or 1.32%, from the previous close of 76,208.16.

The government’s readiness to seal an agreement with the International Monetary Fund (IMF) following the budget was cited by analysts as the reason for the upward trend.

Experts anticipate that in an attempt to bolster its position for a fresh bailout agreement with the International Monetary Fund (IMF), the budget for the fiscal year ending in June 2025 would set aggressive fiscal goals.

Budget for Pakistan, 2024–2025
Pakistan’s budget for the fiscal year 2024–25, with a total expenditure of Rs18.877 trillion, was presented on Wednesday by Minister of Finance and Revenue Muhammad Aurangzeb.

The Finance Minister, Muhammad Aurangzeb, outlined the budget highlights. He stated that the GDP growth target for the fiscal year 2024–25 is set at 3.6 percent, while the inflation rate is anticipated to stay at 12 percent.

He stated that while the primary surplus is anticipated to be 1.0 percent of GDP during the review period, the budget deficit to GDP is forecast to be 6.9 percent over the period under review.

According to the minister, tax income collection increased by 38% in the current fiscal year, and the province will receive Rs7,438 billion. The Federal Board of income expects to earn Rs12,970 billion in revenue for the upcoming fiscal year.

In contrast to the federal government’s projected net income of Rs9,119 billion, he stated that the federation’s non-tax revenue projections are set at Rs3,587 billion.

The federal government’s total outlays are projected to be Rs18,877 billion, with interest payments accounting for the remaining Rs9,775 billion.

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Pakistan currently has $14.38 billion in foreign exchange reserves.

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Pakistan’s commercial banks’ reserves, which stood at $5.28 billion at the conclusion of the week ending on June 7, rose by US$174 million, according to a central bank statement.

Reserving US$6.2 million less, the SBP now has US$9.10 billion in reserves. The causes for the decline in the reserves it had were not disclosed by the central bank.

The SBP released a statement that stated, “SBP reserves decreased by US$ 6 million to US$ 9,103.3 million during the week ended on 07-June-2024.”

The State Bank of Pakistan’s (SBP) foreign exchange reserves were reduced by US$ 63 million as a result of repaying external debt, with the reserves standing at US$ 9.093 billion as of earlier on June 6.

The central bank spokesperson said in a statement that as of the week that concluded on May 31, the nation’s total liquid foreign reserves were $14.31 billion.

In terms of net foreign reserves, commercial banks have US$ 5.22 billion of the overall foreign reserves, according to the SBP.

SBP reserves dropped by US$ 63 million to US$ 9,093.7 million during the week that ended on May 24, 2024, according to the announcement.

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In the local market, the price of gold plummets to Rs240,700/tola.

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Gold with a 24-karat purity level has dropped by Rs1200/tola on the local market.

Each tola of 24-karat gold is now selling for Rs240,700, with a further drop of Rs1029 bringing the price of 10 kilos of gold to Rs206,361. These figures are courtesy of the All Sarafa and Jewelers Association.

Meanwhile, after a $2 decline on the global market, one ounce of gold will be valued $2315.

A tola of gold was worth Rs 600 more on Wednesday.

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