LAHORE: Pakistan did not start the war in the Gulf, but Pakistanis are paying for it every time they stop at a petrol pump. Petrol rose again on Wednesday, to Rs394.83 a litre. Inflation was 10.3% in September, almost twice what it was a year ago. The State Bank, the government and the opposition all agree on where the pressure is coming from. They do not agree on who should carry it.
The Pakistan Bureau of Statistics says prices in September were 10.3% higher than a year earlier. The figure was 11.1% in August and 5.8% last September. For the first three months of this financial year, inflation has averaged 10.2%, against 4.3% in the same months last year.
Energy is doing the damage. Petrol cost 39% more in September than a year before, and electricity 33% more. Transport costs were up 27.4%. Onions more than doubled in price and wheat rose 41%.
Fuel has kept climbing since. Petrol stood at Rs367.75 in early September. It was Rs387.40 on October 1 and is Rs394.83 today. Diesel is Rs395.85.
How fuel reaches the kitchen
In Pakistan the motorcycle is the family car. A rider who fills ten litres a week now pays over a thousand rupees more each month than he did in early September, unless he has managed to register for the government’s discount.
Diesel matters even more, though fewer people buy it directly. It moves the trucks that carry flour, vegetables and milk, and it runs the tubewells and tractors on the farm. When diesel crossed Rs400, fares and food prices followed. In Lahore, the cost of petrol, milk and tomatoes has run well ahead of wages.
The war behind the price
The State Bank dates the present crisis from February 27, when the conflict in the Middle East began. The United States and Israel attacked Iran, shipping through the Strait of Hormuz came under threat, and oil jumped. A pause in the summer brought some relief. Then the fighting flared again.
Pakistan buys most of its fuel from abroad, so every rise in the world price lands here within days. This week the international price of petrol used in Pakistan’s calculation averaged more than $130 a barrel. The crisis has also put a question mark over gas supplies for the winter.
The central bank raised its policy rate to 11.5% in April and has held it there since, most recently on September 14. It said the worsening conflict had pushed up world commodity prices that were already high. Dearer fuel, it said, was feeding into transport costs and from there into the prices of other goods.
The bank expects inflation to ease gradually towards 7% by June 2027. It also admitted that the risks to that forecast had grown considerably. For ordinary people, a high interest rate has its own cost. Loans are expensive, businesses expand less, and jobs are harder to find.
Prime Minister Shehbaz Sharif has said the government is fully aware of the burden and will not leave people alone at a difficult time. On September 13 he announced Rs100 off every litre of petrol for motorcycles, rickshaws and cars of up to 800cc. A motorcyclist can claim it on 20 litres a month, which comes to Rs2,000. The scheme has since been widened to older vehicles.
It had a rough start. Some petrol dealers refused to supply fuel under it in the first days. And it covers petrol only. Diesel, which drives food prices, is not included.
The Finance Division says the path of inflation now depends mostly on world oil prices. The petroleum levy, the tax collected on each litre, has been kept in place.
In Punjab, Chief Minister Maryam Nawaz said on September 22 that the regional situation had increased the need to protect people from inflation, and that her government was working on this alongside security. A week later, in China’s Guizhou province, she said that, “We want to learn and understand how millions of people can be lifted out of poverty through industry, digitalisation and rural development.”
What the opposition and activists say
The levy is where the argument is sharpest. Jamaat-e-Islami chief Hafiz Naeem-ur-Rehman has said that real relief means ending the petroleum levy.
On Wednesday the Pakistan Markazi Muslim League joined in. PMML spokesman, Dr Muzamil Iqbal Hashmi, asked the government for a clear plan for low- and middle-income families. He called for a relief package, a review of taxes and the levy, and lower electricity, gas and petrol prices. Economic growth, he said, means little to ordinary citizens unless it shows up in household incomes, jobs and purchasing power.
Those who work with the poor describe the same thing in different words. Dr Suleman G. Abro, founder of the Sindh-based development organisation SAFCO, said in August that inflation, unemployment and poverty were making life harder for vulnerable communities. “Financial institutions must not limit themselves to providing financial services alone,” he said. They must help people “build secure and dignified lives”.
Adil Nakhoda, economist and assistant professor at IBA said fuel’s direct share of the price index looks limited, but its multiplier effect on the economy is much wider. He said the levy on diesel should be reconsidered because it has a more direct adverse impact on the economy, and he suggested subsidies for poorer motorcycle owners.
Shahid Anwar, former secretary general of the FPCCI called fuel “a double-edged sword”. By his count the government collected a record Rs1.567 trillion from the levy last year, against a target of Rs1.68 trillion this year. He also cautioned against blaming all current inflation on petroleum taxation.
Dr Hafiz Pasha, former finance minister recommended reducing the petroleum levy and increasing BISP assistance.
Dr Ashfaque Hasan Khan, former economic adviser to the finance ministry, warned that further rupee depreciation would raise the cost of imported oil and could push fuel prices higher.
What people on the street say
The plainest account comes from the street. Social acitivist and public speaker Bilal Ahmad said he had not met a single man earning Rs50,000 a month, whether in a job or on daily wages.
“A father cannot buy his daughter a school bag,” he said. “A working man cannot go to hospital.” He pointed out that the same man pays the levy on his petrol and then faces a Rs2,000 traffic fine.
His demands were simple such as cheaper electricity and gas, an end to the levy, and shelters and free kitchens for those with nowhere to go. He also pointed to respectable, white-collar people standing nearby in need. He said he would not ask them anything. “Let their dignity remain.”
The poverty underneath
The numbers bear this out. The World Bank says Pakistan cut poverty from 64.3% in 2001-02 to 21.9% in 2018-19, one of the country’s real achievements. Then came the pandemic, the 2022 floods and record inflation, and the rate climbed back to 25.3% by 2023-24. Measured against the Bank’s global line of $4.20 a day, 44.7% of Pakistanis fall below it. Poverty in villages is more than double the rate in cities.
Those figures were calculated before this year’s oil shock.
Pakistan cannot set the world price of oil. It can decide how the pain is shared at home. Extending relief to diesel would reach food prices in a way a petrol discount does not. The levy is a choice, and so is the size of a traffic fine. Free kitchens and shelters cost little beside the sums being discussed.
Pakistanis have absorbed shock after shock with patience. They have earned a plan that begins with them.
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