Rising Oil Prices Intensify Economic Pressure on Pakistan

New Delhi, May 1: The ongoing conflict in West Asia has begun to significantly impact global oil prices. According to a report, Pakistan is facing its most severe fuel price crisis in half a century. This situation could exacerbate existing economic issues and destabilize Prime Minister Shahbaz Sharif‘s government.

Al Jazeera reports that the rise in global oil prices has hit Pakistan particularly hard, as the country heavily relies on imported energy and remittances from Gulf nations. Additionally, its balance of payments is already in a fragile state.

The report indicates that the conflict in West Asia could severely affect remittances from workers abroad, especially those employed in Gulf countries.

Earlier this week, Prime Minister Shahbaz Sharif stated that Pakistan’s oil import bill, which was $300 million before the conflict, has surged to $800 million. This has nearly erased the economic progress made over the past two years.

Experts quoted in the report warn that rising fuel prices will have a cascading effect on the entire economy. This will impact prices across agriculture, transportation, food items, and essential goods, worsening an already serious inflation crisis.

Economist Kamran Butt told The Dawn that the increase in oil prices triggers a chain reaction throughout the economy. It reduces people’s purchasing power, increases poverty and unemployment, slows down economic activities, and heightens public discontent against the government.

The State Bank of Pakistan has raised its policy interest rate by 1 percentage point to 11.5%, citing rising economic risks. The bank noted that global energy prices, freight charges, and insurance premiums remain significantly above pre-conflict levels, and supply chain disruptions continue to create uncertainty.

The government faces a tough choice: either pass the increased costs onto consumers or provide subsidies for fuel. However, increasing subsidies would widen the budget deficit, which is constrained by conditions set by the International Monetary Fund.

Economist Kaiser Bengali remarked that Pakistan is in a position where even a small financial aid of $1 billion could make the difference between “survival and economic collapse.”