Pakistan increases fuel prices, inflation likely to rise

ISLAMABAD Sun May 1, 2011 1:53am EDT

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ISLAMABAD May 1 (Reuters) - Pakistan increased fuel prices by up to 12 percent, reflecting the rise in global crude oil prices, the Oil and Gas Regulatory Authority (OGRA) said, in a move that could create fresh problems for the fragile government.

The coalition led by President Asif Ali Zardari had halved the increase in petroleum prices in March to mollify a key partner which quit the government in protest over the fuel price hike in January.

The latest increase announced late on Saturday saw the price of petrol (gasoline) raised to 88.41 rupees ($1.04) a litre from 83.56 rupees, up 5.80 percent, OGRA said in a statement.

Light speed diesel rose by 11.8 percent to 88.30 rupees ($1.04) a litre, 9.32 rupees increase.

Pakistan's consumer price index (CPI), a key reflection of inflation, rose 13.16 percent in March from a year ago, and the rise in petrol prices is likely to increase inflation further.

Pakistan, which imports about 80 percent of its oil, spent $3.99 billion on the import of 6.9 million tones of petroleum products and $2.45 billion on 4.3 million tones of crude oil in the first seven months of the 2010/11 (July-June) financial year.

Pakistan linked its domestic fuel prices to global oil prices in 2008.

($=84.7)

(Reporting by Kamran Haider; Editing by Chris Allbritton)

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