The Pakistan Institute of Development Economics (PIDE) said on Sunday in its report that a rise in oil prices may increase the fiscal deficit.
Higher oil prices could lead to inflation, a stronger dollar, and higher import bills. At $100 per barrel, the budget surplus could see a significant reduction.
Prices at $120 and $144 per barrel could further heighten financial pressure. PIDE advised the government to improve the tax system and cut unnecessary expenditures.
The institute urged enhanced digital monitoring to prevent revenue leakage. Due to the International MonetaryIMF programme, there is limited scope to reduce the petroleum levy. Fluctuating oil prices have become a persistent challenge for Pakistan. PIDE recommended the government devise clear and pre-emptive strategies to manage oil shocks.
It is pertinent to note that Prime Minister Shehbaz Sharif rejected on Friday the proposed increase in petrol and diesel prices, stating the government will bear the additional burden of Rs56 billion amid ongoing regional tensions.
