Islamabad, March 22 — A new assessment by the Pakistan Institute of Development Economics (PIDE) warns that any disruption in the Strait of Hormuz could trigger a chain reaction of higher fuel costs, inflationary pressure, currency depreciation, and external-sector instability for Pakistan. The PIDE study, titled “Pakistan’s Exposure to a Strait of Hormuz Shock: Fuel Pricing, Inflation, and External Vulnerability,” models scenarios showing how even modest interruptions to crude flows could have large domestic effects.
Around one-fifth of global petroleum (roughly 20 million barrels per day) transits the Strait, making it a strategic chokepoint. Pakistan depends heavily on imported energy—energy imports account for more than 22% of the country’s total imports—so spikes in global oil prices would rapidly feed into local fuel costs. The report stresses that imported oil price increases are amplified by higher freight and insurance costs, currency depreciation, and domestic levies, all of which push up retail fuel prices and raise costs across the economy.
PIDE’s scenario modelling finds that a mild disruption could lift headline inflation toward about 9% within months, while a more severe shock could push inflation beyond 12%. High-speed diesel, integral to transport, agriculture and food supply chains, is identified as a key transmitter of price pressures. The study concludes Pakistan’s exposure to a Hormuz shock is substantial and that such an external event could quickly morph into a broad domestic economic crisis, weakening the rupee and worsening the external balance.
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