Pakistan lowers petrol, diesel prices as Moody’s downgrades rating to Caa3

In a bid to provide some relief to the Pakistani common man, the Shehbaz Sharif government has lowered the prices of motor speed petrol by PKR 5 with effect from March 1. These prices will remain effective from March 1 to March 15, as per Pakistan’s finance minister Ishaq Dar.

After this revision, motor speed (MS) petrol will now cost PKR 267 per litre in the western neighbour. The prices of kerosene and light diesel oil have been lowered by PKR 15 and PKR 12 respectively. Post this revision, kerosene oil costs Rs 187.73 per litre whereas light diesel oil sells for PKR 184.68 per litre.

There has been no change in the cost of high-speed diesel, which costs PKR 280 per litre.

Meanwhile, global rating agency Moody’s has downgraded the Pakistan government’s local and foreign currency issuer and senior unsecured debt ratings from Caa1 to Caa3. The rating agency said, “The decision to downgrade the ratings is driven by Moody’s assessment that Pakistan’s increasingly fragile liquidity and external position significantly raises default risks to a level consistent with Caa3 rating.”

Moody’s also noted the International Monetary Fund’s (IMF) engagement beyond the current programme will likely help support additional financing from other partners that could reduce default risk if achieved urgently and without raising social pressures.

While Moody’s elaborated on default risks, a study by Asian Development Bank Institute suggested that Pakistan’s debt has become unsustainable. The country’s external debt and GDP are around $130 billion or almost 95.39 per cent of its entire GDP.

Pakistan is spending nearly half its federal budget on debt servicing. The cash-strapped western neighbour has to return around $22 billion over the next 12 months and a total of $80 billion in the next three-and-a-half years when its forex reserves stand at around $3 billion and economic growth rate is at 2 per cent.

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