Pakistan Economic Crisis Deepens as Oil, Ghee Prices Soar to Record Highs; What’s Next?

The Pakistan government on Wednesday, June 1, hiked the rates of ghee and cooking oil by as much as Rs 208 and Rs 213 respectively, in an unexpected move. The rates have come into effect on the day amid fears of an economic crisis, which comes at a time when Sri Lanka, the island nation of south Asia, is facing a similar disaster for months. The latest announcement by the Pakistan government sent shockwaves throughout the country, which is already battling an imminent economic crisis.

An official of the Utility Stores Corporation (USC) told ANI that with this hike, the price of food oil and ghee would be at an all-time high of Rs 555 per kg and Rs 605 per litre, which was Rs 540-560 per kg in the retail market. “USC had issued a notification of this whooping jump in ghee and cooking oil rates effective June 1,” Pakistan’s leading newspaper Dawn reported, without specifying a reason for this sudden move. Oil and ghee prices have risen 300 per cent in Pakistan over the last three months, and has gone over the ceiling with Indonesia’s palm oil export ban.

According to the Dawn report quoting Secretary-General of Pakistan Vanaspati Manufacturers Association (PVMA), Umer Islam Khan, the retail prices of ghee and cooking oil would soon come on a par with USC will soon come down in accordance with USC rates. USC, a state-owned firm, operates throughout Pakistan to provide goods at subsidised rates to citizens.

Khan said that the manufacturers of cooking oil and ghee have stopped giving the products on credit to the USC as the corporation had not cleared outstanding Rs 2-3 billion to the manufacturers, ANI reported.

Pakistani Rupee at Lowest in May

As per a report by Bloomberg, the Pakistani rupee is set for its biggest monthly decline in two years amid spiralling finances and uncertainty over the International Monetary Fund’s bailout plan. The Pakistani rupee has declined by 7 per cent in May, registering its sharpest drop since March 2020, as the country struggles to keep its economy on track while negotiating on a bailout package with the IMF and other countries.

“Pakistan is to repay USD 21 billion in foreign debt in the next fiscal year, so it is a must to enter the International Monetary Fund (IMF) loan programme (worth USD 6 billion) to arrange the required financing,” ANI quoted the country’s finance minister Miftah Ismail as saying.

Pakistan will need $36 billion to $37 billion in financing for the fiscal year starting June, Ismail added. The international bonds of the country have lost one-third of its value, with the country yet to reach a bailout agreement with the IMF. The minister said that Pakistan is not in a position to raise foreign debts and the only way to come out of this is to control inflation. However, that does not look like a plausible scenario in the immediate future, with the government announcing sharp price hikes in basic items.

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