US-Iran tensions threaten Pakistan’s economic fragility

https://arab.news/vr9rr

As an IMF review mission settles this week for an assessment on Pakistan’s economy, the numbers on their spreadsheets tell a story of hard-won stabilization. Inflation is down, reserves have been rebuilt to roughly three months of import cover, and the current account is looking safe. Yet the arithmetic that matters most to Islamabad is not on any IMF worksheet. It is being calculated in the risk premiums attached to oil tankers navigating the Strait of Hormuz and in the employment contracts of five million Pakistani workers across the Gulf. For an economy that imports over 80 percent of its oil and relies on the Gulf for more than half of its annual remittances, the US-Iran escalation is not a distant geopolitical drama. It is a direct, quantifiable threat to the balance of payments and the IMF program progress that supports it.

The most immediate transmission channel runs through the energy trade. Roughly 20 percent of global oil consumption passes through the Strait of Hormuz daily, with over 80 percent destined for Asian markets. Pakistan’s entire import-dependent energy architecture is downstream of that chokepoint. Even a temporary disruption, or merely the credible threat of........

© Arab News Pakistan