Pakistan faces economic pressures; High oil prices push inflation towards 11% – The

Pakistan’s faltering economy is likely to remain under continued pressure, with double-digit inflation expected to continue if global oil prices continue to rise amid the ongoing Middle East crisis, according to a report by Dawn newspaper.Topline Securities Ltd, in its latest ‘Pakistan Strategy’ report released on Saturday, gave a bleak assessment of the impact of rising energy costs and regional instability on the country’s economy and stock market. The mediation described the situation as “protracted and evolving,” warning that any improvement depends on an immediate and peaceful resolution of the conflict.

The report, cited by ANI, said that under current conditions, inflation could average between 9 and 10 per cent over the next year, with FY26 figures for the last quarter expected to exceed 11 per cent.

This forecast is based on oil prices at $100 per barrel, with every $10 increase adding about 50 basis points to inflation. If the price of oil rises to $120 a barrel, the annual inflation rate could reach 11 percent, which could force the State Bank of Pakistan to make more aggressive interest rate increases.Rising inflationary pressures are expected to slow economic growth. Topline Securities lowered its FY27 GDP forecast to between 2.5 and 3.0 percent from a previous estimate of 4.0 percent.

Growth in fiscal year 2026 is expected to range between 3.5 to 4.0 percent, but the industrial sector remains weak, with growth likely to fall to just 1 percent from about 4 percent.According to Dawn, the FY2027 current account deficit could exceed $8 billion if the government fails to maintain strict controls on imports, exacerbating pressure on foreign exchange reserves. The fiscal deficit for fiscal year 2026 is expected to range between 4.0 and 4.5 percent of GDP, exceeding the targets set by the International Monetary Fund.Pakistan’s stock market was among the worst-performing markets in the world, reflecting the country’s heavy reliance on imported energy. Oil imports are expected to reach $15 billion in fiscal year 2026, while Pakistan imports about 85% of its energy needs. This reliance contributed to a 15 percent decline in the market during the first quarter of the year.Economic prospects are also affected by an expected decline in remittances of 3.5 percent, with inflows from the GCC region expected to decline by 10 percent.

Exports are also expected to decline by 4 percent.On the currency front, the Pakistani rupee is expected to weaken to Rs298 against the US dollar by FY27. The ongoing conflict could push the decline beyond historical averages, adding pressure on supply and demand.Dunn noted that while domestic exploration companies may eventually increase production to reduce reliance on LNG imports, the near-term outlook remains characterized by rising interest rates, rising urea prices, and increasing reliance on emergency administrative measures to prevent a deeper economic crisis.