Debt-ridden Pakistan feels the heat of rising oil prices
New Delhi, April 14
The March Economic Outlook prepared by the Finance Division of the Pakistan Government has stated that oil markets remain on tenterhooks, multiple supply outages have heightened crude markets, while geopolitical tensions between Iran and the US have intensified. As a result, oil markets remain volatile, according to an article in the Karachi-based Business Recorder.
On March 30, the IMF stated that in the Middle East and South Asia, already meagre reserves and limited market access makes external shocks to financing conditions more dangerous - "especially as higher import bills for fuel, fertiliser, and food widen trade deficits and put pressure on currencies."
This observation is particularly relevant to Pakistan given that reserves as on March 19, 2026 were 16.4 billion dollars - an amount that is a massive improvement from the under 3 billion dollars (2916.7 million dollars) reserves on February 3, 2023, yet they constitute over 12 billion-dollar annual roll-overs by three friendly countries with the rest borrowed from other multilaterals/bilaterals and maturing debt equity from issuance of Eurobonds/Sukuk, the article points out.
It highlights that this month alone the United Arab Emirates requested a 3.45 billion dollar loan recall from Pakistan (there was reportedly no request to cut the 800 million dollars owed by Etisalat to Pakistan since the privatization of PTCL decades ago) and an additional 1.4 billion dollars was repaid on maturing Eurobonds this week past.
Pakistan's access to foreign commercial markets has remained compromised for the past three to four years due to a fragile economy that accounts for non-investment grade rating by the three international rating agencies.
In spite of the much touted rating improvement last year, sourced to the country being on an active IMF programme, Pakistan's rating remains in the highly speculative category defined as at material default risk with a limited margin of safety with financial commitments being met though capacity for continued payment is vulnerable to deterioration in the business and economic environment.
The Middle East conflict has certainly deteriorated Pakistan's business and economic environment further, as it has globally, the article further states.
— IANS
Reader Comments
It's a tough situation for any neighboring country to be in, even with past differences. Rising global oil prices hurt everyone. Maybe this will push for more regional cooperation on energy? Just a thought. 🤔
The article mentions the UAE loan recall. This is key. When your "friendly" lenders start asking for their money back, the house of cards shakes. Their economy is in a very precarious position. India must ensure our economic stability is not affected by any regional spillover.
Reading this from an economic perspective, it's a sobering lesson in fiscal discipline. A "highly speculative" rating is a major red flag for any investment. It shows the importance of building genuine forex reserves through exports and FDI, not just debt.
While the situation is difficult, I hope the common people there don't suffer too much. Inflation from high oil prices hits the poor the hardest. We've seen it here too. Geopolitics shouldn't cripple economies like this. 🙏
The bit about the PTCL privatization and Etisalat debt is telling. Years of such deals with questionable long-term benefits have led to this. It underscores why strategic assets need careful handling. A cautionary tale for all developing nations.
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