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AsianOil COMMENTARY AsianOil
reported to have restricted access to financ- ing for Pakistan’s energy imports, others have started charging higher rates as a risk premium, making it more challenging still for the coun- try to access the finances needed for energy imports. Meanwhile, the rupee recently saw its worst weekly decline since 1998.
Elsewhere in the region, India, which is a major supplier to Sri Lanka, has begun seek- ing up-front payments for the oil it sends to the island country. This has raised concerns over Sri Lanka’s ability to pay off its debts.
What next?
South Asian countries are working to find ways out of the crisis, but the situation does not look promising. However, Pakistan reached a pre- liminary deal with the International Monetary Fund (IMF) in mid-July to revive a $6bn bail-out package. This has been welcomed as a step in the right direction, but media have reported the gov- ernment as saying the budgetary commitment with the IMF cannot be met without additional taxation. As a result, the government decided to impose PKR30 billion ($134mn) worth of new taxes as it works to meet the conditions of the IMF bail-out. It has also scaled back subsidies on fuel, natural gas and electricity as part of these efforts.
In the meantime, almost a quarter of Paki- stan’s power generation is reported to have been
shut owing to shortages of fuel required to run
it.
Meanwhile, the government of Bangladesh
is reported to have ordered an operational halt at diesel-fuelled power plants. The country has been imposing power cuts in a bid to make its diesel and natural gas stockpiles last longer, thereby reducing a need for costly fuel imports. Bangladesh has also sought IMF assistance, but officials in Dhaka have noted that this is pre-emptive and insisted that it should not to be equated with the bailout funds sought by Sri Lanka and Pakistan.
And in Sri Lanka, the government has said it would launch a national programme to ration and distribute fuels. The country has also yet to meet the conditions for further aid from the IMF, and it is also dealing with the collapse of its previous government last month amid pro- tests over government mismanagement and fuel shortages.
There have been hopes that India would be able to provide some stability for the region, but it has also struggled with a weakened currency that has made it more difficult to pay for energy imports.
While South Asian countries are trying to do what they can to ease the pressure, there is no end to the crisis in sight. As a result, analysts are expecting rationing and fuel supply shortages to continue affecting the region for some time.
Fuel traders have been reported as saying they are hesitant to sell refined products such as gasoline and fuel oil to Pakistan.
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