Islamabad (Commerce Desk): Due to escalating tensions in the Middle East and a potential blockage of the Strait of Hormuz, experts warn that inflation in Pakistan could rise to 12%, as disruptions in oil supply may trigger immediate price increases.
According to officials, the Pakistan Institute of Development Economics (PIDE) has released a study report analyzing the potential impact of a Strait of Hormuz closure on Pakistan’s economy. The report notes that 20 million barrels of oil pass through this crucial waterway daily, and any halt in supply is expected to push prices up immediately.
PIDE’s report projects that inflation could start at 8.8% over six months and rise to 10.4% under a moderate shock scenario, reaching 12% in a severe shock scenario. It also warns that monthly oil import bills could increase to $384 million, potentially turning the annual current account surplus into a $4.6 billion deficit.
The report highlights that 22% of Pakistan’s imports consist of energy products. Additional factors such as shipping, insurance costs, depreciation of the Pakistani rupee, and tax rates may further increase prices.
To mitigate negative effects, PIDE recommends emergency policy measures, along with special monitoring of diesel used in transport, agriculture, and food sectors, and improvements in the supply chain to reduce dependency.
