The Pakistan government has increased the rates of ghee and cooking oil to an all-time high of Rs 555 and Rs 605 per litre from today. The rates of ghee hovers between Rs 540- Rs 560 per litre in the country, marking an unprecedented rise of the prices by Rs 208 and Rs 213 respectively.
In April, Sri Lanka was left with no option but to default on its external debt of around $ 51 billion whereas Pakistan faces $ 6.4 billion in dollar debt due over the next three years as Prime Minister Shehbaz Sharif’s new government is trying to meet bailout terms set by the International Monetary Fund (IMF).
The country, under pressure to keep its economy afloat and avert a sovereign default, needs about $ 3.16 billion to pay dollar bonds and loans this year, $ 1.52 billion next year and $ 1.71 billion in 2024.
With a $ 45 billion trade deficit in the current fiscal year to June and foreign-exchange reserves at $ 10.1 billion, or less than two months of imports, Pakistan faces the prospect of default for the second time in its history.
Meanwhile, Pakistan Vanaspati Manufacturers Association (PVMA) Secretary-General Umer Islam Khan hinted that the retail rates of ghee and cooking oil would soon come on a par with Utility Stores Corporation (USC).
The USC is a Pakistani state-owned enterprise that operates throughout the country and provides basic commodities to the general public at subsidised rates.
Khan said ghee and cooking oil manufacturers have stopped giving the products on credit to the USC as the corporation had not cleared outstanding Rs 2-3 billion to the manufacturers.
Pakistan has witnessed a 300% increase in edible oil and ghee prices in the past six months. Pakistan is dependent on palm oil from Indonesia. The country imports more than 85% of its commodity from Indonesia.
The current shipment problem of palm oil export from Indonesia is the key factor behind the skyrocketing prices of cooking oil and ghee in Pakistan.
PVMA Secretary-General Khan said not a single loaded vessel had been on the high seas or at Indonesia port for shipments to Pakistan — despite the lifting of an export ban by Indonesia on palm oil on 23 May.
The normal duty rate on import of crude palm oil is Rs 8,000 per ton while its import under Free Trade Agreement (FTA) or Preferential Trade Agreement (PTA) from Indonesia and Malaysia is Rs 6,800 per ton. In both cases, import is then subject to 2% additional customs duty, 2% withholding tax, and 17% of general sales tax.
The business community had approached Pakistan’s Ministry of Commerce to remove a 2% additional customs duty on the import of palm oil from Malaysia to offset the high cost of Malaysian palm oil which is costlier by 15-20% compared to Indonesia’s.
Yet, Pakistan’s consumer price index (CPI) rose 13.8% in May from a year earlier, the country’s statistics bureau said today. That compared with a rise of 13.4% in April from a year earlier. The CPI increased 0.4% in May from the previous month. The inflation figures come days after the government partially eliminated costly fuel subsidies in a bid to unlock much-needed funding from the IMF.