Karachi — Pakistan’s fragile economy faces a heightened risk of sustained double-digit inflation if global oil prices continue climbing amid the Middle East conflict, analysts told Dawn. Rising energy costs and import disruptions are straining the country’s external position and financial stability.
In its latest Pakistan Strategy report, Topline Securities Ltd warns that higher energy bills and regional instability are weighing on growth and keeping the stock market volatile. The brokerage calls the outlook “prolonged and evolving,” noting that a stable recovery hinges on a swift, peaceful resolution to the conflict.
Under current assumptions, Topline projects average inflation of about 9–10 percent over the coming year, with fourth-quarter FY26 inflation likely above 11 percent. Those estimates assume oil at USD 100 per barrel; the firm estimates each USD 10 rise in oil prices adds roughly 50 basis points to inflation. If oil reaches USD 120 per barrel, annual inflation could climb to about 11 percent, likely forcing the State Bank of Pakistan into further aggressive rate hikes.
The inflation shock is expected to weigh on economic activity. Topline has trimmed its FY27 GDP forecast to 2.5–3.0 percent from an earlier 4.0 percent estimate. FY26 growth is now seen at 3.5–4.0 percent, while industrial growth could slow sharply to around 1 percent, down from nearly 4 percent.
Dawn also reported that the current account deficit for FY27 could exceed USD 8 billion unless strict import controls remain in place, further depleting already thin foreign exchange reserves. The fiscal deficit for FY26 is forecast at 4.0–4.5 percent of GDP, overshooting IMF targets.
The Pakistan Stock Exchange has been one of the world’s worst performers, reflecting the economy’s heavy reliance on imported energy. Petroleum imports are projected at about USD 15 billion in FY26, and Pakistan imports roughly 85 percent of its energy needs. The market fell some 15 percent in the first quarter.
Remittances are expected to decline roughly 3.5 percent overall, with inflows from Gulf Cooperation Council countries potentially down about 10 percent. Exports may fall around 4 percent. The Pakistani rupee is forecast to weaken to about PKR 298 per USD by FY27; continued conflict could push depreciation beyond historical norms, exposing the currency to severe supply-demand pressures.
While longer-term domestic exploration could raise local production and reduce some LNG imports, the near-term outlook includes high interest rates, rising urea prices, and reliance on emergency administrative measures to avert a macroeconomic collapse.
(This summary is based on a syndicated report carried by Dawn and Topline Securities; the original item was published via ANI. The Tribune republishes syndicated content as received and assumes no responsibility for its accuracy or completeness.)
