Pakistan hikes fuel prices for third straight fortnight

The Pakistan government has raised the prices of petroleum products for the third consecutive fortnight, attributing the move to rising international crude oil prices driven by geopolitical tensions in the Middle East.

Under the latest revision, petrol will now cost PKR 272.15 per liter, an increase of PKR 5.36, while high-speed diesel (HSD) has been raised by PKR 11.37 to PKR 284.35 per liter.

Economic analysts anticipate the fuel price hikes, combined with recent gas tariff adjustments, could push inflation in July to a range of 4.5% to 5%. Official inflation data for the month is expected on August 1.

Despite these inflationary pressures, the State Bank of Pakistan (SBP) has opted to keep its key policy rate unchanged, citing fragile external conditions and heightened uncertainty due to ongoing geopolitical developments.

In tandem with fuel price adjustments, the government has set an ambitious Petroleum Development Levy (PDL) target of PKR 1.468 trillion for the current fiscal year, marking a 26% increase from the revised FY25 target.

The PDL has become a critical source of non-tax revenue, particularly as Pakistan remains committed to fiscal consolidation under its ongoing program with the International Monetary Fund (IMF).

According to a market analyst, the federal budget for fiscal year 2025-26 reinforces Pakistan’s reform trajectory, maintaining a cautious and non-inflationary stance. The budget introduced only modest changes to petroleum-related levies, avoiding significant new taxes to protect the fragile economic recovery.

Officials confirm that the FY26 budget was crafted to support macroeconomic stability while aligning with IMF-guided structural reforms. Inflation is projected to stay within the SBP’s target range of 5% to 7%, with full-year average inflation estimated at 5.4%.

However, economic observers caution that the recent rise in fixed charges for domestic gas consumers could place additional upward pressure on prices in the coming months, potentially complicating inflation management and threatening the stability of the government’s fiscal framework.