Pakistan’s economy is under threat due to the US-Israel conflict with Iran, as the nation heavily relies on imported fuel, facing soaring energy prices amidst the Middle East turmoil. The prolonged war and elevated energy costs could lead to macroeconomic stress, hindering Pakistan’s growth momentum. Global energy price fluctuations may impact the GDP, potentially slowing down the recently stabilized economy.
The repercussions of the conflict extend beyond oil price hikes and supply disruptions, with potential adverse effects on remittances and export demand, as highlighted in a Dawn newspaper article based in Karachi. Rising petroleum purchases could inflate the import bill, while dwindling exports and a slowdown in key markets may further strain the economy. Any slowdown in Gulf economies, major contributors to Pakistan’s remittances, could exacerbate the external economic situation.
A significant increase in the current account deficit is anticipated if these challenges persist, reminiscent of the 2022 crisis triggered by surging global oil and commodity prices. The public could face prolonged hardships, as elevated global oil prices directly impact petrol and electricity costs, leading to a broader inflationary trend through increased transportation and logistics expenses. If crude prices surge akin to the Ukraine conflict peaks, Pakistan risks a return to high inflation, affecting low- to middle-income households.
