Pakistan to revise oil prices up by 20-25pc

They said that their main effort was to avoid any major set back to the economy till the holding of elections and the formation of the new elected government in the country.

“But I do agree with you that the vulnerability of the Pakistani currency is a serious issue and equally other important issues are the fiscal deficit and government’s bank borrowing and they both have to be restricted,” said an official requesting anonymity.

However, caretaker finance minister Dr Salman Shah when contacted said he did not see any major problem to the economy in the short term but said, “God forbid if the political uncertainty increases, then things might cause problems”.

“But when foreign exchange reserves are all time high, foreign flow of funds are on track and the rupee is stable, there is nothing to be worried about,” he said. He said that supply-demand situation some time escalates and some time comes down but that does not mean that there is any serious threat to the country’s currency. The central bank, he said, was playing its role to ensure stability of Pak rupee.

“There is no chance of the major weakening of Pak rupee”, he said adding that in the medium term market trends were positive and hopefully Pak rupee will continue to maintain its stability. The market, he said, was once again buoyant and poised to further go up as there was no major withdrawal of funds.

The finance minister said that the target for foreign exchange reserves was $14.5 billion which have increased to an all time high over $16.5 billion. Fundamentals of the economy, he said, were strong and there was an intense activity in the stock markets.

“But political developments do worry me”, Dr Shah said hoping that the second phase of having general elections will move the country towards economic stability”, he said. The first phase, he pointed out, has been completed with the election of the President Pervez Musharraf and the doffing of his military uniform.

The most important thing, the finance minister said, was the growth of the economy which he claimed, did not face any major problem. He said overall production has not been affected which will help achieve 7 per cent plus GDP target set for the current financial year.

He said he also did not see any problem in achieving 4 per cent fiscal deficit target set for 2007-08. He said considerable revenues were being generated by the Central Board of Revenue (CBR). But he agreed that tax-to-GDP ratio needed to be increased. The overall tax-to-GDP ratio has come down from 10 per cent plus to about 9.5 per cent. To a question Dr Shah said that increasing oil prices in the international market was a matter of concern for the government and that the issue will be tackled by revising upward these prices shortly.

“But let me assure the people through you that we will have gradual increase in oil prices so that there is no serious inflationary impact on prices”. This, he said, will be done to avoid burdening the common man. He said it was becoming difficult for the government to continue giving subsidy worth Rs13-14 billion every month to oil marketing companies on account of ever increasing international oil prices. But now the government has

been forced to “carefully examine” the whole issue to increase petroleum prices. He said that so far there is no decision whether to have 15, 20 or 25 per cent increase in the oil prices.

He said that despite facing difficulties, oil prices remained unchanged for so long in the previous government just to save people from having additional burden. “But perhaps now is the time to rationalise oil prices otherwise we will be facing problems”, he said. He also did not rule out the possibilities of enhancing gas and electricity prices for meeting various budgetary targets.

Dr Shah said although foreign investors have not decided to withdraw their investment, they were carefully watching the political situation. “So far investors are feeling comfortable with our policies”, he added. “We are making right choices, therefore, I am quite optimistic about our economy”, the finance minister said.