By Staff Reporter
ISLAMABAD: The finance ministry has notified a new government account to anchor a price stabilisation fund for petroleum products, formalising a mechanism the cabinet approved earlier this month to soften the impact of volatile global oil prices on consumers.
The notification, issued by the Ministry of Finance on Monday, follows a June 5 decision by the federal cabinet and creates the legal architecture under which the Petroleum Prices Stabilisation Fund will operate. All proceeds received in the fund’s name will be credited to the federation’s public account under the major head “Special Deposit Fund,” according to the notification.
Detailed operating procedures, including how the fund will be governed day to day, are still being worked out. The finance division, the petroleum division and the Oil and Gas Regulatory Authority will jointly finalise those modalities in line with legal and financial requirements, with separate approvals to be sought before the fund becomes fully operational, the notification said.
The decision to establish the fund follows months of sharp swings in international oil prices, driven in part by the war between Israel and the United States against Iran, which pushed fuel costs to historic highs and exposed the absence of a formal mechanism for managing such shocks. In several instances during the period, the government secured cargoes directly through special diplomatic channels, achieving notable savings compared with standard industry pricing. But those arrangements were carried out on an ad hoc basis using administrative powers, rather than through a structured legal framework.
Officials familiar with the matter said the fund holds no deposits at present, and that the cabinet’s decision was intended primarily to position the government to capture similar windfalls if they arise again in future. They said funds accumulated in recent months, as well as savings generated through future austerity measures, could be channelled into the account. Once funded, the resources would be drawn on to smooth weekly adjustments in domestic petroleum prices, reducing the shock to consumers when global prices move sharply.
The officials added that the government’s room to manoeuvre financially in the coming fiscal year would remain tightly constrained under the terms of its programme with the International Monetary Fund, limiting how aggressively new money could be funnelled into the fund. A limited allocation from special provincial grants extended to the federal government could nonetheless be set aside for petroleum, oil and lubricants price stability, they said.
The fund is also designed to capture savings that arise when Pakistan sources oil from non-traditional suppliers such as the United States, Russia or Iran, or when specialised storage arrangements yield costs below those of standard imports from the Middle East. Under the new framework, such windfalls could be channelled fully or partly into price stabilisation rather than accruing solely to oil-importing companies and refineries, as has typically been the case.
The move marks one of the more concrete steps Pakistan’s government has taken this year to build a financial buffer against external oil-price shocks, at a time when the country’s broader fiscal flexibility remains limited by its IMF commitments.
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