NewKerala.com

Pakistan's Fuel Prices Near Rs 400/Litre Deepen Economic Crisis

Pakistan is grappling with soaring fuel prices as petrol and diesel approach Rs 400 per litre, compounding economic pressures on households and the government. The State Bank of Pakistan raised its policy rate to 11.5% to combat inflation that surged to 10.9% in April. The Middle East conflict poses additional risks through expensive energy shipments and potential disruptions to remittances from Gulf workers. Analysts warn that sustained oil prices near $100 per barrel could strain Pakistan's current account by Rs 1.38 trillion and fiscal balance by Rs 459 billion.

Key Points: Pakistan Fuel Price Hike Strains Economy and Households

  • Petrol and diesel prices near Rs 400/litre in Pakistan
  • Central bank rate hike to 11.5% to curb 10.9% inflation
  • Middle East conflict threatens energy imports and remittances
  • IMF warns oil price rise could trim GDP by 0.5% and worsen fiscal balance
2 min read

Rising fuel prices deepen economic strain in Pakistan: Report

Pakistan faces economic strain as petrol nears Rs 400/litre, inflation surges to 10.9%, and IMF warns of GDP impact from oil price shocks.

"While citizens are bearing the brunt of inflation, the government is risking its political capital by making unpopular decisions - The News International report"

New Delhi, May 8

Pakistan has entered into a difficult phase of economic management as petrol and high‑speed diesel near Rs 400 a litre, compounding pressures on households and the government, a report has said.

Pakistan-based The News International said in the report that State Bank of Pakistan's policy rate hike to 11.5 per cent adds strain on borrowers.

"While citizens are bearing the brunt of inflation, the government is risking its political capital by making unpopular decisions," it said.

The neighbouring nation's central bank rate hike aimed to rein in inflation that surged to 10.9 per cent year‑on‑year in April from 7.3 per cent in March.

The country's heavy exposure to the Gulf economy - through energy imports and remittances from workers in the region - leaves it highly vulnerable to fallout from the Middle East conflict, the report added.

"Besides expensive energy shipments, a slowdown in Gulf construction, tighter regional financial conditions or delayed hiring due to the ongoing war can hit Pakistan through workers' income as well as capital flows," it said.

The report cited IMF has estimated that a 10 per cent average rise in oil prices typically trims GDP by about 0.5 percentage points and lifts inflation by roughly 1 percentage point for the average MENAP (Middle East, North Africa, Afghanistan, and Pakistan) oil‑importer.

However, for Pakistan, such a shock would worsen the current‑account balance by about 0.3 percentage points of GDP and the fiscal balance by about 0.1 percentage points.

Based on Pakistan's nominal GDP in FY25 of about Rs 114.7 trillion, analysts estimated that a sustained oil price near $100 per barrel could translate into a full‑year stress of around Rs 1.38 trillion on its current account and a fiscal hit of about Rs 459 billion, with much of the burden likely to spill into FY27 if prices stay elevated.

The Middle East conflict has pushed an already fragile inflation outlook back into more dangerous territory.

"The closure of the Strait of Hormuz and the Iran war have caused the largest oil-supply disruption on record, measured by daily output lost. Peak losses have exceeded 12 million barrels per day, equal to about 11.5 per cent of global oil demand," the report said.

While previous earlier oil shocks were centred on crude, the current disruption has impacted crude, natural gas, refined fuels and fertiliser imports, the report noted.

- IANS

Share this article:

Reader Comments

P
Priya S
The Gulf dependency is a double-edged sword. Remittances and energy imports from the Middle East – one crisis there and entire economy wobbles. Our government should take notes and diversify trade partners. Pakistan's plight shows how vulnerable we all are.
M
Michael C
The IMF's numbers are scary: 10% oil price rise = 0.5% GDP loss and 1% inflation bump. For Pakistan, that's Rs 1.38 trillion stress on current account. Their fiscal deficit is already ballooning. Hard to see a quick fix without foreign aid.
S
Siddharth J
This is what happens when you don't build strategic oil reserves or invest in renewable energy. Pakistan has been living on borrowed time. Meanwhile, our own fuel prices in India aren't great either – but at least we have some buffer. Time to learn from others' mistakes.
E
Emma D
Interesting how the Strait of Hormuz closure is affecting not just crude but also natural gas, refined fuels, and fertilisers. That's a multi-front supply crisis. Pakistan's agriculture sector will take a hit too if fertiliser imports slow down. Really complex situation.
K
Kavya N
The report says the government is "risking political capital" by making unpopular decisions. That's the hardest part – doing the right thing when people are already suffering. But if they don't reform now, it'll be worse later. Tough choices ahead for Islamabad.

We welcome thoughtful discussions from our readers. Please keep comments respectful and on-topic.

Leave a Comment

Minimum 50 characters 0/50