Fuel Price Surges Blamed for Economic Instability

ISLAMABAD: According to Gohar Ejaz, the former caretaker federal minister for Commerce and Industries, the country’s economic cycles of expansion and contraction were caused by increases in international fuel costs, not by imports of consumer goods spurred by low interest rates.

He emphasized that the trade and current account deficits in both 2018 and 2022 were caused by external fuel price shocks rather than domestic policy rates.

Need for Policy Alignment

The former minister stated that data indicates the boom and bust cycles of 2018 and 2022 were not due to low interest rates. He reiterated that surges in international fuel prices, not consumer goods imports driven by low interest rates, precipitated the economic downturns.

Ejaz noted that the government wastes Rs3 trillion annually on expenditures as a result of high interest rates. He also pointed out that over half of the federal budget goes toward servicing domestic debt, based on the inaccurate idea that these payments help avert boom-bust cycles. He restated that external fuel price shocks, not domestic policy rates, caused higher trade and current account deficits in both 2018 and 2022.