Fuel crisis intensifies in Pakistan
2023.01.31 12:05
Fuel crisis intensifies in Pakistan
By Tiffany Smith
Budrigannews.com – According to traders and industry sources, Pakistan could run out of fuel in February because banks have stopped financing and facilitating import payments due to dwindling foreign exchange reserves.
The country in South Asia is having problems with its balance of payments, and the falling value of the Pakistani rupee is making it more expensive to buy goods from other countries. Pakistan’s import bill is largely made up of energy.
Pakistan typically relies on imported electricity to meet more than a third of its annual demand. As a result of Russia’s invasion of Ukraine, prices for imported electricity skyrocketed.
This past two weeks, there is no shortage. “We might see shortages in the next fortnight if we don’t have LCs (letters of credit) open right now,” a senior official at one of the oil companies.
In the oil trade, a typical form of payment guarantee to the exporter is a letter of credit issued by the importer’s banks.
However, due to a severe lack of foreign currency, oil traders are avoiding Pakistan and Sri Lanka. Pakistan raised the price of gasoline and diesel on Sunday by 16 percent, reaching 249.80 Pakistani rupees ($0.9373) per liter. Additionally, the country is in negotiations with the International Monetary Fund (IMF) in an effort to reopen a bailout package that has been held up.
In the past few months, the state-owned refiner Pakistan State Oil (PSO) and Pakistan LNG Ltd. have not responded to a slew of fuel tenders. FUEL/TENDA][MOG/TENDA][MDIS/TENDA] State Bank of Pakistan officials cited “severe liquidity issues” for delays in the opening of LCs at an industry meeting on financial challenges faced by fuel importers, according to a Reuters review of a Jan. 19 letter from Imran Ahmed, director general of oil.
The managing director of PSO stated at the same meeting that the non-opening of LCs had already resulted in the cancellation of a gasoline cargo that was scheduled to be loaded on January 13. According to the letter, he added that the country has limited stocks, which could result in dry conditions.
In the past, Pakistan’s refining, pipeline, and marketing companies were represented by the Oil Companies Advisory Council (OCAC), which noted that delays in the opening of LCs could “lead to a fuel shortage in the country.”
Pakistan must import approximately 430,000 tonnes of gasoline, 200,000 tonnes of diesel, and 650,000 tonnes of every month, at a cost of $1.3 billion, to meet local demand, according to an OCAC letter dated January 13 to the Ministry of Finance.
According to the OCAC, “critical imports of petroleum products would be affected if LCs are not established on a timely basis,” which could result in a fuel shortage in the country.
According to Kpler data, Pakistan only purchased 223,000 tonnes of gasoline in December, compared to 608,000 tonnes the previous year. According to the data, the country was expected to import 270,000 tonnes of fuel in January of this year, compared to 393,000 tonnes in the same month in 2022.
“Why were the SBP (State Bank of Pakistan) and sector meeting all week if there were no problems with LCs in Pakistan?” a high-ranking employee of one of the oil companies stated.
Last week, the PSO stated that it had ample stocks and was ensuring a continuous supply of gasoline and gasoil across the nation.
