Pakistan’s strait jacket: A tragedy that need not unfold

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The war in West Asia did not arrive for Pakistan as a single catastrophic shock. It arrived as a slow tightening, each turn of the vice exposing a vulnerability already there. As the Strait of Hormuz choked global energy flows and oil breached a hundred dollars a barrel, Pakistan’s structural weaknesses stand fully exposed: precarious reserves, a narrow industrial base, and a governing class that has preferred the comfort of short-term stability over the discipline of structural adjustment.

The exchange rate is the most visible symptom. Pakistan’s Real Effective Exchange Rate has climbed to 105, per the State Bank, signalling overvaluation even as competitors depreciate aggressively. India allowed the rupee to fall with oil prices, as Ashoka Mody has documented: painful, but honest. Pakistan’s authorities have refused that discipline, holding the rupee stable through administrative intervention. Pakistan imports roughly a third of its energy needs, and the disruption of Gulf LNG supply chains compounds the damage. The textile sector — the backbone of export earnings — faces rising input costs and eroding competitiveness simultaneously, as Indian and Bangladeshi rivals, having accepted honest currency adjustment, undercut Pakistani goods in........

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