Reactive move

A LARGE abrupt rollback of petrol prices through a reduction of Rs80 per litre in the petroleum levy following an increase announced a day before is a populist move by a government struggling to balance emerging economic constraints and domestic political compulsions. Coming amid public outrage, the prime minister’s decision to reduce petrol prices reflects a deeper policy failure. Rather than signalling sound economic management, it underscores a tendency to respond to political pressure instead of governing by principle. The rollback may offer immediate relief to middle-class households, and will likely be presented by the ruling party as a pro-people move aimed at easing the burden on citizens. However, such reactive policymaking will neither protect people from the next wave of inflation nor contribute to building a stable and predictable economic framework. The decision shows the government’s reliance on across-the-board relief regardless of income level rather than targeted intervention. This is fiscally costly and economically inefficient. Fuel consumption is disproportionately higher among upper-income groups, meaning that a significant portion of this relief will accrue to a small minority that is least in need of state support. In a country with limited fiscal space, such blanket measures risk misallocation of scarce resources.

The initial price hike itself — 43pc for petrol and 55pc for diesel — was undeniably inflationary, feeding directly into transport costs, food prices and broader inflation expectations. However, the reversal is no less destabilising for Pakistan’s already fragile position. It distorts price signals, discourages energy conservation and, more worryingly, injects uncertainty ahead of the next budget by sending negative signals about fiscal discipline. The failure to fully pass on the surge in global energy prices triggered by the US-Israel war on Iran to consumers has already cost the exchequer Rs129bn, with the meagre development budget absorbing a hit of around Rs100bn. This underlines a hard reality: the fiscal gap created by subsidising petrol will not disappear; it will merely shift. In the end, low- and middle-income households will be paying the price, whether through higher taxes and levies, reduced public spending, or inflation. If the government is genuinely interested in providing lasting relief to the public, it must focus on meaningful tax and expenditure reforms the administration has long been dodging.

Published in Dawn, April 5th, 2026

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