On Tuesday, PM Shahbaz Sharif sought a summary from the ministries of finance and petroleum regarding the reduction in petroleum prices in light of decreasing crude rates in the international market. According to reports, the global benchmark Brent crude saw a reduction of $7 to below $100 a barrel earlier this week. Following this development, the government is considering passing on the benefit of reduced oil prices in the international market to the consumers that have been suffering at the hands of record-breaking inflation.

Terming the reduction in fuel prices as a ‘gift’ for the public on the occasion of Eid, reports suggest that the rate of petrol is expected to be cut by Rs 10 and of diesel by Rs 25 per litre. However, the prices of petroleum products cannot be reviewed ahead of July 16 and the federal cabinet will have to give its approval before any relief can be passed on to the consumers.

This announcement has triggered a debate about whether such a move could jeopardise the IMF programme that is yet to be finalised. While members of the PM’s office have assured that the relief measure will have no adverse implications for the IMF programme, questions remain over the pending implementation of the petroleum levy and sales tax. While some experts are of the opinion that the IMF has no more tolerance for any such manoeuvres that are influenced by political considerations, others are of the opinion that the government has some wiggle room and that it has 11 months remaining to implement these taxes and make up for the lost revenue.

Given the timing of this announcement, it could also be a short-term measure on part of the government in the run-up to the upcoming by-elections. It remains to be seen if this goes through and what its impact will be. Prices tend to be sticky in the short-run and perhaps some of the impact will be reflected at petrol stations and in bus fares, but only if the government monitors the market very carefully. Considering how relentless the increase in prices has been over the past couple of months, solely from the perspective of consumers, any relief would be welcome at this point in time.