EXTERNAL shocks have repeatedly shaped Pakistan’s economic trajectory. From oil crises to global financial turbulence, the pattern is a familiar one: rising import costs weaken the balance-of-payments, inflation accelerates and pressure mounts on the exchange rate. The latest tensions in the Middle East threaten to trigger a similar sequence at a moment when Pakistan’s policy space is already constrained by an IMF stabilisation programme. The Middle East crises, combined with Pak-Afghan border tensions and persistent security challenges in the tribal districts and Balochistan, adds another layer of economic pressure just as the country had begun to achieve a measure of stability.

The most immediate risk lies in the trade balance as commodity tailwinds reverse. Pakistan imports roughly between $16 billion and $18bn of petroleum products annually — about a quarter of total imports. Every $10 increase in oil prices would add around $1.5bn to $2bn to the import bill. At the same time, higher freight costs and weaker global demand could soften exports, particularly textiles. The combination of higher energy imports and slower export growth would widen the current account deficit and put renewed pressure on the rupee.

Remittances........

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