Pakistan could face annual economic losses ranging from $10 billion to $68 billion due to the ongoing Middle East conflict, with inflation potentially rising to 17% under severe conditions, an economist told lawmakers on Thursday.
Ali Salman, head of the Policy Research Institute of Market Economy, presented three impact scenarios during a briefing to the National Assembly Standing Committee on Finance.
The session was chaired by Syed Naveed Qamar, who said the estimated losses could exceed the scale of Pakistan’s current $7 billion programme with the International Monetary Fund.
The conflict, which began on February 28, has disrupted energy supply routes, with Iran effectively closing the Strait of Hormuz while the United States enforced a naval blockade targeting Iranian oil shipments.
Current and Adverse Impact Outlook
In the current scenario, based on 51 days of conflict, Pakistan faces annual losses between $10 billion and $14 billion. Salman said the country is already experiencing a $334 million monthly increase in oil import costs, alongside a $333 million drop in remittances and a $400 million hit to exports.
Freight charges have also risen by about $100 million per month. Inflation in this scenario could remain between 10% and 12%.
Prime Minister Shehbaz Sharif recently noted that the weekly oil import bill has surged from $300 million to $800 million, reflecting the immediate strain on external accounts.
Under an adverse scenario where the conflict continues for three months, losses could rise to between $24 billion and $32 billion annually. Monthly oil import costs may increase by $1 billion, while remittances could fall by $700 million and exports by $800 million.
Pakistan typically receives around $3.8 billion in remittances and earns roughly $2.5 billion in exports each month, making these declines significant.
Inflation could climb to between 13% and 15% in this scenario, further eroding purchasing power.
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Severe Scenario and Wider Fallout
In a worst-case scenario, where oil prices surge to $150 per barrel, the economic impact could reach between $50 billion and $68 billion annually. Salman said this would translate into a monthly shock of $5.7 billion.
The oil import bill alone could increase by $2.8 billion per month. Remittances may drop by $1.5 billion monthly, while exports could decline by $1.2 billion.
The war risk surcharge could reach $5.7 billion per month, adding further pressure on trade and logistics. Inflation, he warned, could spike to 17%, posing a major challenge for economic stability.
Salman noted that rising oil prices have already added about $4 billion to Pakistan’s external payments in just two months.
Lawmakers also debated fiscal governance during the session. Members questioned proposed amendments to the Fiscal Responsibility and Debt Limitation Act, with concerns raised over expanding powers to appoint directors in the Debt Office.
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Hina Rabbani Khar questioned why the government had failed to maintain the 56% debt-to-GDP limit, noting that the ratio stood at 70.7% last fiscal year.
Bilal Azhar Kayani described the debt ceiling as an “aspirational clause,” a view that drew disagreement from committee members.
Analysts say the evolving conflict could test Pakistan’s fragile economic recovery, particularly if energy prices remain elevated and external inflows weaken further.
