KARACHI: Pakistan’s economy will most likely be faced with tougher challenges in the second half of the current fiscal year as it remains heavily dependent on imported fuel oil whose prices are steadily on the rise.
Oil prices rose 50% to the three-year high of $68.5 per barrel on Monday and were expected to increase to around $80 in the next six months.
“Good days seem to be over… second half’s (January-June 2018) import bill will be significantly higher than the first half (of current fiscal year 2017-18),” BMA Capital economist Fawad Khan said.
The State Bank of Pakistan (SBP) and JP Morgan, a renowned international investment bank, recently anticipated that the price of international oil benchmark (Brent crude oil) would reach $70 per barrel in the next six months.
Goldman Sachs, however, last week revised up its forecast to $75 per barrel in three months and $82.5 in the next six months.
The continuous surge in oil prices in world markets due to pick-up in demand and weakening of the US dollar against major world currencies under the global currency war has forced authorities in Pakistan to pass on the burden to the consumers.
This is expected to have a domino effect on the entire economy by inducing cost-push inflation. It would also make transportation of commodities and their prices expensive, fuel inflationary pressure and prompt the SBP to further increase the benchmark interest rate, which it enhanced 25 basis points two weeks ago to 6%.
Simultaneously, the uptick in international oil prices and the country’s surging import bill would also widen the current account deficit and press authorities to take additional measures to bolster exports and inward remittances and cut imports.
