Introduction
Pakistan’s economic outlook is facing fresh uncertainty as global oil prices continue to rise. Amid ongoing Middle East tensions, experts warn that higher energy costs could slow growth, increase inflation, and put pressure on the country’s external accounts.
Inflation Likely to Stay in Double Digits
According to Beyond Time News, analysts believe inflation in Pakistan could remain above 10% if oil prices continue to climb. A recent report by Topline Securities highlights that rising fuel costs are already pushing prices upward.
For example, if oil reaches $100 per barrel, inflation may average 9–10% over the next year. However, if prices hit $120 per barrel, inflation could climb to 10–11% or even higher. As a result, the State Bank of Pakistan may increase interest rates further to control inflation.
Economic Growth Forecast Cut
Rising oil prices are also expected to slow economic growth. In fact, analysts have reduced Pakistan’s GDP growth forecast for FY27 to 2.5–3.0%, down from an earlier estimate of 4%.
Meanwhile, growth for FY26 is expected to remain between 3.5–4.0%.
If the crisis continues:
- Industrial growth could drop sharply
- Agriculture growth may slow slightly
- Services sector expansion could weaken
On the other hand, if tensions ease, growth may recover to around 3.5–4.0%.
Read more:Oil Prices Hit Multi-Year High as Iran–US Tensions Raise Supply Fears
Current Account Deficit May Widen
The current account deficit (CAD) is another major concern. Analysts estimate it could stay below $3.5 billion with strict controls. However, if imports increase or policies weaken, the deficit could exceed $8 billion.
Consequently, foreign exchange reserves may come under pressure, making economic stability harder to maintain.
Stock Market Under Pressure
The KSE-100 Index has already taken a hit due to rising oil prices and regional uncertainty. In the first quarter alone, it ranked among the worst-performing markets globally.
Pakistan’s heavy reliance on imported energy — nearly 85% of its needs — makes it especially vulnerable. Petroleum imports alone are expected to reach $15 billion in FY26.
Imports, Exports, and Remittances Outlook
Non-oil imports could reach $48–50 billion in FY26. Therefore, controlling imports will remain critical for economic stability.
At the same time:
- Remittances may fall by 3.5%
- Exports could decline by 4%
- Petroleum consumption may drop due to higher prices
Overall, these trends could further strain the economy.
Interest Rates and Currency Outlook
The State Bank of Pakistan has already raised the policy rate to 11.5%. If oil prices remain high, further hikes are likely.
Additionally, the Pakistani rupee may weaken, with projections suggesting it could reach Rs294–298 per dollar by FY27. Without strong policy measures, depreciation could accelerate.
Sectors That May Benefit
Despite the challenges, some sectors could perform better:
- Exploration & Production (E&P) companies
- Fertiliser industry
- Banking sector
For instance, higher oil prices may boost local energy production, while banks could benefit from increased interest rates.
Final Thoughts
Pakistan’s economy stands at a critical crossroads. While rising oil prices pose serious risks, timely policy decisions and global developments will determine the final outcome.
Ultimately, managing inflation, controlling imports, and stabilizing the currency will be key to navigating this challenging period.
