Economy amidst conflicts

Confronted by escalating tensions in the Middle East and repeated disruptions to shipping through the Strait of Hormuz, Pakistan has begun taking concrete steps to establish its first-ever Strategic Petroleum Reserves (SPR).

The country currently operates largely on a fragile, just-in-time commercial inventory model, with petroleum stocks providing only limited protection against prolonged supply disruptions. Under the proposed strategy, the government plans to establish a 45-day emergency oil buffer in the first phase, with a longer- term objective of expanding reserve capacity to 90 days.

These stocks could be requisitioned by the state during a national supply emergency. As a longer- term strategic initiative, Islamabad is promoting the development of a Pakistan Maritime Energy City at Gwadar Port. Gulf countries, including Saudi Arabia and Kuwait, are being invited to establish and maintain strategic crude-oil reserves there. Such an arrangement could allow Gulf producers to store oil outside the immediate conflict zone while giving Pakistan a right of first purchase in an emergency.

Islamabad is simultaneously seeking financial protection against the immediate impact of energy disruptions. It has reportedly formally requested a $6.7 billion deferred-payment oil facility from Saudi Arabia on highly concessional terms: an interest rate of one per cent, a 15-year repayment period and a five-year grace period.

The immediate challenge is to survive the current crisis without allowing higher energy costs to derail macroeconomic stabilisation

The immediate challenge is to survive the current crisis without allowing higher energy costs to derail macroeconomic stabilisation

The proposal would represent a significant improvement over the $1.2bn facility agreed in February 2025 at an interest rate of 6pc, which expired in April.

The request comes as renewed hostilities between Iran and the United States have pushed Brent crude prices sharply higher, increasing risks to Pakistan’s energy and food security. Sustained high oil prices could put fresh pressure on foreign exchange reserves and........

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