According to traders and industry insiders, Pakistan may experience a shortage of fuel in February as banks have ceased funding and facilitating payments for imports as a result of declining foreign exchange reserves.
Due to the country’s balance of payments crisis and the deteriorating value of the rupee, imported goods are becoming more expensive. A significant portion of the import bill is made up of energy.
Over a third of Pakistan’s annual power needs are normally satisfied by imported natural gas, whose costs skyrocketed when Russia invaded Ukraine.
A senior official at one of the oil companies while talking to Reuters said, ““There is no shortage this fortnight. If we don’t have LCs (letters of credit) open right now, we might see shortages in the next fortnight.”
A common type of payment guarantee for the exporter in the oil trade is a letter of credit issued by the banks of the importer.
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But due to a severe lack of foreign currency, oil traders are avoiding places like Pakistan and Sri Lanka. On Sunday, Pakistan increased the price of gasoline and diesel by 16% to Rs249.80 a liter and is currently in negotiations with the International Monetary Fund to resume a halted bailout program.
In the past few months, a flurry of fuel tenders have gone unawarded by state-owned refiner Pakistan State Oil (PSO) and Pakistan LNG Ltd.