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 decreasing value of the rupee, imported goods are becoming more expensive. The largest component of the import bill is energy.
Over a third of Pakistan’s annual power needs are normally satisfied by imported natural gas, whose prices soared when Russia invaded Ukraine.
“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 senior official at one of the oil companies told Reuters.
A letter of credit issued by the importer’s banks is a standard form of payment guarantee in the oil trade to the exporter.
‘Sufficient stock’: OGRA denies reports of petrol shortage in country
But due to a severe lack of foreign currency, oil traders are avoiding countries like Pakistan and Sri Lanka. The federal government raised the price of petrol and diesel by 16% on Sunday and is trying to renegotiate with the IMF to resume a halted bailout programme.
In the past few months, a flurry of fuel tenders has gone unawarded by state-owned refiner Pakistan State Oil (PSO) and Pakistan LNG Ltd.
According to a Jan. 19 letter from Imran Ahmed, director general of oil, State Bank of Pakistan officials acknowledged “serious liquidity concerns” faced by the country at a meeting on the financial constraints encountered by gasoline importers.
The managing director of PSO stated during the same meeting that the failure to open LCs has already resulted in the cancellation of a shipment of gasoline scheduled to be loaded on January 13. According to the letter, “He added that the country has limited stocks and such a condition can lead to dry out.”
Delays in the establishment of LCs may “cause a fuel crisis in the country,” the Oil Businesses Advisory Council (OCAC), which represents Pakistan’s refining, pipeline, and marketing companies, has previously warned.
“If LCs are not established on a timely basis, critical imports of petroleum products would be impacted which may lead to a fuel shortage in the country,” the OCAC said.
Pakistan bought only 223,000 tonnes of gasoline in December versus 608,000 tonnes in the same period a year earlier, data from Kpler showed. In January this year, the country was projected to import 270,000 tonnes of the fuel, compared with 393,000 tonnes in the same month in 2022, the data showed.
