Diesel imports likely to dip

Miftah believes energy import pressure will ease in coming months

ISLAMABAD:

Finance Minister Miftah Ismail has said that with 2 billion litres of diesel available in the country, the import bill for the fuel is likely to be much lower next month.

Similarly, there was no shortage of furnace oil for the current and next month, therefore, energy-related import pressure would ease significantly in the coming months, he said in a recent cabinet meeting.

The minister pointed out that the finalisation of modalities for rationalising electricity tariff caused delay in the release of loan tranche by the International Monetary Fund (IMF).

Turning to the pressure on rupee-dollar exchange rate, Ismail was of the view that the pressure stemmed from payments against the import bill of June, which was worth $7.5 billion.

He elaborated that the government could not intervene in the foreign exchange market for controlling the rising dollar rate in light of the commitment to the IMF.

“However, all other regulatory and enforcement measures are being ensured in association with banks and currency exchange companies.”

He assured the house that the rupee-dollar exchange rate and the pressure on foreign currency reserves would come down and the exchange rate was expected to stabilise from August onwards.

Meanwhile, the oil industry argued that with the worst free fall of the rupee, new Letters of Credit (LCs) were being opened at higher than the inter-bank rupee-dollar exchange rate, indicating there would be more spending by Pakistan on the
import bill.

Had Pakistan substituted 100% imports of oil products with crude supplies, the country would have saved over $1 billion in the past six months, said the industry people while talking to The Express Tribune.

If the oil refining sector was given the boost by the government, it could easily help reduce reliance on imports and save billions of dollars, they stressed.

They lamented that the industry was not being utilised properly, though it could help meet the country’s energy needs.

According to them, the refineries are currently operating below capacity at 60-65%, which has sparked concern among foreign investors, but the government has yet to take serious notice of the issue.

Industry officials said the government had been talking about investment by Saudi Arabia and other countries in the oil sector, but the Saudi foreign minister, in a recent statement, clearly underlined the importance of having sufficient capacity.

Pakistan’s annual demand for petroleum products stands at approximately 18 million tons, which the domestic refiners can easily meet due to their overall capacity.

It clearly indicated that the outflow of US dollar could be curtailed and the rupee could be stabilised through reduced imports, they said.

Published in The Express Tribune, July 29^th, 2022.

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