New Delhi, March 19 (IANS). The ongoing war between America, Israel and Iran has posed a major threat to Pakistan’s fragile economy. This is because Pakistan is heavily dependent on imported fuel, and energy prices have increased due to the conflict, which has now spread to many countries in the Middle East.
If this war continues for a long time and energy prices remain high, Pakistan may again face a widespread economic crisis, which will hamper the pace of its development. Any volatility in global energy prices could weigh on GDP and cause the economy, which had only recently begun to recover after years of instability, to slow again.
According to a report published in Karachi’s Dawn newspaper, “The effects of the war will not be limited to high oil prices and supply disruptions. A prolonged conflict could also weaken the flow of remittances and reduce export demand due to a slowdown in international trade.”
The import bill may rise sharply due to increased petroleum imports, while exports, which have already fallen by about 8 percent in the July to February period, may further weaken due to the economic slowdown. Also, any slowdown in the economies of the Gulf countries, from which Pakistan receives more than half of its total remittances, could cause a negative external shock. All these pressures may lead to an increase in Pakistan’s balance of payments deficit.
If these trends continue, the current account deficit could widen significantly. The situation is reminiscent of the 2022 crisis, when rising global oil and commodity prices pushed the economy to the brink of crisis and Pakistan had to seek assistance from the IMF.
The public impact could be even more severe and long-lasting, as higher global oil prices directly lead to higher petrol and electricity rates. Additionally, rising transportation and logistics costs also fuel broader inflation.
If crude oil prices approach the highs seen during the Ukraine war, Pakistan could again fall into hyperinflation, which will hit low- and middle-income households that have not yet fully recovered from previous shocks.
–IANS
AY/DKP
