Pakistan announced an increase in petrol and diesel prices on Tuesday to better reflect rising international prices and to raise revenue to meet the objectives of an International Monetary Fund (IMF) bailout.
In a recorded video statement, Finance Minister Ishaq Dar said gasoline, or petrol, prices would be raised by 19.95 Pakistani rupees to 272.95 Pakistani rupees ($0.952) per litre and diesel by 19.90 rupees to 273.40 rupees per litre, an increase of 7.8% for both fuels.
Fuel prices have increased sharply in global markets in the last 15 days, Dar said, adding his government had tried to minimise the hike. Benchmark Brent crude oil prices climbed 16% during July.
He said the country was not in a position to deviate from the IMF’s standby agreement finalised on June 30 after eight months of negotiations over tough fiscal discipline measures.
“You all know that the international commitments we have with the IMF regarding the petroleum levy,” he said, and added he could have announced a smaller increase had the commitments not been there.
Islamabad has committed to a petroleum levy of up to 50 rupees ($0.1745) a litre alongside a string of painful measures, including raising extra revenues, increasing energy prices and a market based exchange rate, which has already fueled historic inflation.
Dar did not say what the levy was in his statement on Tuesday but last month he said the government would try to keep it at about 45 rupees a litre.
The IMF has also called on Pakistan to maintain a tight monetary policy. The central bank on Monday, however, kept the policy rate steady at 22%, with its governor saying the lender’s requirement of tight policy didn’t necessarily mean raising the rate.
The petroleum price increases will have political implications for Dar’s coalition government just months before a general election. The South Asian nation of 220 million people already has an inflation rate of more than 29%
The statistics bureau of Pakistan is expected to release July inflation data later on Tuesday.