Two Pakistani economic researchers expect the import of Russian oil to contribute to a “significant” reduction in energy prices in the country, listing the benefits of this agreement, whether for Islamabad or Moscow.
On Sunday, the country received the country’s first shipment of Russian oil, amounting to 45,000 tons, according to the Pakistani newspaper “The News”, at a price between 50 and 52 dollars per barrel, against a maximum price of 60 dollars a barrel imposed by the G7 countries.
In turn, Pakistani Oil Minister Mossadeq Malik said on Monday that Pakistan had paid for the first government imports of Russian crude oil at a discounted price in Chinese currency.
The minister explained that the deal stands at 100,000 tons, of which 45,000 tons have arrived at Karachi port, and the rest are on their way.
Benefits for both countries
Economist and director of the Asian Civilization and Development Research Institute, Shaquille Ramai, explained to Sky News Arabia the benefits of the deal for Islamabad and Moscow:
Importing Russian oil at a discount will significantly reduce commodity prices in the country. It is estimated that at this stage the government can lower prices by PKR 30 per litre. Pakistan’s purchase of Russian oil offers a new outlet, in addition to Moscow’s growing sales to India and China. What benefit Russia to find alternatives to its oil away from Western markets sanctioned because of the conflict in Ukraine.
The yuan replaces the dollar
Economist, Ali Imran Syed, agrees with him, who expected the deal to meet much of the country’s oil needs at reduced and competitive prices, adding:
The mode of payment in Chinese yuan against dollar reduces the pressure on the Central Bank of Pakistan, which is suffering from the scarcity of monetary reserves. Thus alleviating the pressure on the demand for the dollar, which could improve the exchange rate of the lira in the medium term. The reduction in the prices of petroleum derivatives by the government, as expected, can lead to a reduction in inflation rates, through a significant drop in the prices of products linked to petroleum derivatives.
Payment in yuan
Paying Pakistan the value of Russian oil in Chinese currency seems to be a solution to help the Pakistani economy to survive; The central bank’s foreign exchange reserves are barely enough to cover a month’s worth of imports, with the budget closely watched by the International Monetary Fund, which is pushing Islamabad to lift subsidies on energy prices and taxes.
On Friday, the government unveiled a budget of 14.5 trillion rupees (about $50.5 billion), more than half of which was earmarked to service debts worth 7.3 trillion rupees.
Pakistan’s economy is suffering from a balance-of-payments crisis as it attempts to repay huge external debt service after months of political chaos, in addition to catastrophic floods, which have led to huge losses and disrupted investments.
drop in demand
Demand for oil derivatives in Pakistan decreased by 21.9%, in the July to March period of FY2023, falling to 13.1 million tons in the first 9 months of FY2023 , compared to 16.7 million tonnes during the same period. fiscal year 2022 period.
The downward trend is attributed to lower demand for fuel oil, motor diesel, gasoline and high-octane blended components, as these products account for more than 95% of total demand.
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