The government on Monday decreased the high-speed diesel (HSD) price by Rs14 and kept the petrol price unchanged for the fortnight ending December 31, owing to favourable international market prices.

In a late-night announcement, the Petroleum Division said the revision followed movements in international markets and recommendations from the Oil and Gas Regulatory Authority (Ogra).

According to the announcement, the ex-depot price of HSD has been reduced by Rs14 per litre (5pc) to Rs265.65 per litre for the current fortnight from Rs279.65 per litre. Most of the transport sector runs on HSD.

Its price is considered inflationary as it is mostly used in heavy transport vehicles, trains and agricultural engines like trucks, buses, tractors, tube-wells, threshers, and particularly adds to the prices of vegetables and other eatables.

Transporters had already increased their fares based on an approximate Rs27 per litre increase between May and August, and have not reversed them despite a Rs9 per litre cut.

The ex-depot petrol price was kept unchanged at Rs263.45 per litre. Petrol is primarily used in private transport, small vehicles, rickshaws, and two-wheelers, and directly impacts the budgets of the middle and lower-middle classes.

Although general sales tax (GST) is zero on all the petroleum products, the government is charging Rs78 per litre on diesel and Rs82 per litre on petrol and high octane products on account of petrol levy and an Rs2.50 per litre climate support levy (CSL).

The government is also charging about Rs16-17 per litre custom duty on petrol and HSD, irrespective of their local production or imports. In addition, about Rs17 per litre distribution and sale margins are going to oil companies and their dealers.

Petrol and HSD are the major revenue spinners with their monthly average sales of about 700,000 – 800,000 tonnes per month compared to just 10,000 tonnes of monthly demand for kerosene. The government recovered about Rs1.161 trillion through the petroleum levy alone in FY2025 and expects this to jump by about 27pc to Rs1.470 trillion during the current fiscal year.

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Finance Minister Muhammad Aurangzeb underscored Pakistan’s strategic shift from seeking aid-based support towards trade- and investment-led engagement to ensure long-term economic sustainability and mutually beneficial partnerships, particularly with the Gulf Cooperation Council (GCC) countries.

In an interview with CNN Business Arabia, Aurangzeb highlighted the vision of Prime Minister Shehbaz Sharif, which reflected Pakistan’s renewed economic confidence and reform momentum.

He said that Pakistan has followed a comprehensive macroeconomic stabilisation program for the past 18 months, which has delivered tangible and measurable results, while inflation has declined to single-digit levels from an unprecedented 38%.

On the fiscal front, Pakistan has achieved primary surpluses, while the current account deficit remains well within targeted limits. According to the finance czar, the exchange rate has also stabilised, and foreign exchange reserves have improved to approximately 2.5 months of import cover, reflecting strengthening external buffers.

He maintained that the country has two major external validations, which indicate Pakistan’s improving economic outlook.

Firstly, he said, all three international credit rating agencies have aligned their assessments this year by upgrading Pakistan’s ratings and outlook. On the other hand, the country has completed the second review under the IMF Extended Fund Facility, with the IMF Executive Board granting its approval earlier this week.

He stated that such developments demonstrate growing international confidence in Pakistan’s economic management and reform trajectory.

The finance minister further emphasised that macroeconomic stabilisation has been achieved through a coordinated approach combining disciplined monetary and fiscal policies with an ambitious structural reform agenda.

“Reforms are being implemented across key areas, including taxation, energy, state-owned enterprises, public financial management, and privatisation, aimed at consolidating stability and laying the foundation for sustainable growth,” Aurangzeb said.

The finance minister also highlighted the significant progress in Pakistan’s improvement of the tax-to-GDP ratio.

“During the last fiscal year, it increased to 10.3 per cent, with a clear path towards 11 per cent,” the finance minister said.

He further explained the government’s objective to reach a level of tax collection that ensures fiscal sustainability over the medium to long term.

“This is being pursued through widening the tax base by bringing previously undertaxed but economically significant sectors such as real estate, agriculture, and wholesale and retail trade into the formal net, alongside deepening compliance by reducing leakages through production monitoring systems and AI-enabled technologies. Simultaneously, the tax administration is being transformed through reforms in people, processes, and technology,” he said.

The minister further highlighted efforts to improve governance in [power] distribution companies, involve private sector expertise, advance privatisation, and reduce circular debt, which has long constrained the power sector.

“Rationalising the tariff regime is essential to making energy more competitive for industry, thereby enabling industrial revival and economic growth,” he stressed.

Senator Aurangzeb acknowledged the longstanding support of GCC countries, including Saudi Arabia, the United Arab Emirates, and Qatar, for their critical role in critical role supporting Pakistan through financing, funding, and cooperation at international financial institutions such as the International Monetary Fund.

“This relationship is now evolving towards a new phase centred on trade expansion and investment flows. Remittances continue to play a vital role in supporting the current account, with inflows reaching approximately $38 billion last year and projected to rise to $41-42 billion this year, over half of which originates from GCC countries,” he added.

He further said, “Pakistan is actively engaging with GCC partners to attract investment in priority sectors including energy, oil and gas, minerals and mining, artificial intelligence, digital infrastructure, pharmaceuticals, and agriculture.”

Expressing optimism regarding progress on a Free Trade Agreement (FTA) with the GCC, he termed the discussions at an “advanced stage”.

Senator Aurangzeb reiterated the government’s strategic direction in shifting the collective focus on trade rather than relying on aid.

“Pakistan’s future lies in fostering trade and investment partnerships rather than reliance on aid,” said the finance minister.

He also emphasised the role of foreign direct investment in supporting the higher GDP growth, generating employment opportunities, and delivering shared economic benefits for Pakistan and its partners.

“The government is fully mobilised to translate this vision into reality.” He concluded.

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The State Bank of Pakistan (SBP) on Monday slashed its policy rate by 50 bps to 10.5 per cent.

The last reduction in the policy rate came in May. Since then, the benchmark rate has been held at 11 per cent, even as headline inflation dipped to 3pc earlier this year. November inflation was recorded at 6.1pc, compared to 6.2pc in October.

The International Monetary Fund (IMF) had advised maintaining tight liquidity to curb expected inflation, despite mounting industry pressure.

In a second review released on Thursday, the Fund said the monetary policy needed to remain “appropriately tight and data-dependent” to keep expectations anchored, while noting that the SBP had maintained positive real interest rates on a forward-looking basis.

It said the tight stance had been pivotal in reducing inflation and should be maintained to ensure price stability and support the rebuilding of external buffers.

Industrial leaders had previously called for a reduction in interest rates to help them stay competitive globally.

More to follow

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