Govt sets up stabilisation fund to cushion global oil price shocks

ISLAMABAD: The government has set up a “Petroleum Prices Stabilisation Fund” aimed at cushioning the domestic market against extreme fluctuations in global oil prices.

The Ministry of Finance has issued a formal notification establishing the fund and allocating a dedicated public account head and object code for its operations, according to government circulars sent to relevant departments and the accountant generals of all four provinces.

“All proceeds received in the name of the Petroleum Prices Stabilisation Fund will be credited to the Public Account of the Federation under the major head ‘Special Deposit Fund’,” the Ministry of Finance notification stated.

Provincial governments have been instructed to finalise the necessary administrative arrangements to facilitate the collection and seamless transfer of these funds.

The notification explained that the operational framework, rules, and operating procedures for governing the fund would be jointly developed by the Finance Division, the Petroleum Division, and the Oil and Gas Regulatory Authority (Ogra).

Officials said that a separate legal and financial mechanism would be approved subsequently to dictate exactly how and when the funds will be deployed to subsidise or absorb retail price shocks.

The structural move follows historic oil price hikes triggered in recent months by the US-Israel war on Iran.

While Islamabad had previously secured a few distressed crude cargoes directly through special diplomatic channels —yielding substantial savings compared to standard industry pricing — those operations were handled on an ad hoc basis using emergency administrative powers rather than a permanent legal mechanism.

Pakistan, which relies heavily on imported oil to meet its energy needs, frequently faces severe balance-of-payments pressure and rampant domestic inflation due to global energy market volatility.

Officials said that the creation of the stabilisation fund represents a key institutional step to bring predictability to retail fuel prices and safeguard its fragile macroeconomic recovery.