The government announced another reduction in fuel prices on Saturday, imposing a further five percent sales tax. They are making certain that the consumer does not get any relief from the fall in oil prices and the whole explanation by Finance Minister Ishaq Dar does not add up. In a very economically irresponsible move, PM Nawaz Sharif announced cuts 12 hours before the Oil and Gas Regulatory Authority (Ogra) notification to score political points. Announcing the price cut in the middle of the day can cause problems for gas station owners as people usually stop buying petrol on the last day before price cuts are due. But have no fear; Dar knows what Dar is doing.

The cut in oil prices is expected to help the government earn an additional Rs.12 bn in revenue alone. In January, the government was able to collect Rs.16 bn after imposing 5pc GST on petroleum products, above the normal GST rate of 17 percent. The new rate is 27 percent. One would support this increase in taxation, if the money was going into ending circular debt or new projects. But with the way the industry has been, its probably being burned to generate heating for the PM house.

The billions that Dar has predicted due to the increase in taxes is to cover losses. The government says that revenues on crude oil priced higher than $60 on the international market are shared between the government and the companies, but when prices fall below $60, the government’s share goes down to zero. To cover this loss the government decided to increase the GST on petroleum products. Justifying the additional GST, Mr Dar said that several countries including India, took such measures to arrest the impact of declining oil prices on revenue collection. But was an increase in the sale of oil not anticipated? Sale has increased, and people have even begun to switch from gas to petrol. Falling revenues would be matched by rising sales. But have no fear, Dar knows his economics.

Most recently, Dar has said that the fiscal deficit target for 2014-15 may be missed because of additional spending on the National Action Plan (NAP). None of the blame is on the Finance Minister; the man has always been able to argue that it’s not his fault. Most of the explanations are simplistic. Taxes due to falling prices... like it’s the peoples fault that prices fell. No mention of rising sales, or increasing the tax base so that people like himself pay more taxes. No mention of the NAP actually being a potential fiscal stimulus with an increase in spending for an economy that has always been contracting under IMF pressure. Whatever. Dar knows best.