ISLAMABAD – Pakistan may see a histrionic decrease in the prices ofpetroleum products, followed by a traumatic decrease in the internationalmarket.
The world is witnessing a significant drop in oil prices after Saudi Arabiastarted a price war with Russia by slashing selling prices amid coronavirusoutbreak.
Global oil prices fell by almost 30%, and it is the lowest most since 1991,and this sudden decline in prices will definitely create its impact on thePakistani economy.
Top securities – A fastest-growing brokerage house in Pakistan shared ananalysis shared today. The report says that the global drop in oil priceswill likely benefit Pakistan’s macro-economic indicators even though oilcompanies will take a hit due to the drop.
“We believe lower oil prices are a net positive for Pakistan’s macros(especially the external account), as 26% of Pakistan’s imports are oilprice-driven,” said the firm in a report published on Monday. It added thatif oil prices drop to $20 per barrel, Pakistan’s oil import bill woulddecrease by $ 38-4.2 billion.
The firm is also forecasting that exports and remittances could see acumulative reduction by around $1-2 billion.
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“Hence, on a net basis, Pakistan’s external account could potentiallyimprove by US$2.2-2.8 billion (50% of the current account deficit) due to$20 per barrel lower oil prices,” said the report. It also expected thegreenback to remain stable against the Rupee in the near future.
The securities firm also said that lower oil prices will also help give theruling Pakistan Tehreek-e-Insaf government enough fiscal space “to sailthrough at least the next couple of IMF reviews”.
However, the report noted that it was unlikely that the government wouldpass on the impact of lower oil prices to the consumers. It added thatdecreased oil prices will also help the government pocket part of lower oilprices in electricity tariffs which would decrease the circular debt.
