A report by Business Recorder indicates that while geopolitical conflicts initially send tremors through global financial markets, their deeper and more lasting impact is often felt domestically, particularly in economies like Pakistan that are heavily exposed to external variables. For many countries, a rise in energy prices, tightening global financial conditions, and currency pressures might seem like routine adjustments, but for Pakistan, these have acted as significant economic triggers. These shocks are transmitted through higher import bills, inflationary pressures, and weakening exchange rates, ultimately straining the domestic economy.
Furthermore, the neighboring nation imports up to 80 percent of its oil requirements, with its petroleum import bill estimated at around $18 billion in FY23. The report highlighted that a sustained increase of $10 per barrel in global oil prices could add up to $1.5 billion annually to import costs, intensifying pressure on already limited foreign exchange reserves. Such increases not only weaken the Pakistani rupee but also fuel inflation, especially through higher fuel and electricity prices — factors that often spill over into political instability. Over the past decade, global volatility driven by oil prices, interest rates, or capital flows has repeatedly followed a similar pattern in Pakistan.
According to the report, a key area identified for improvement is energy diversification. Despite having significant renewable potential — particularly wind corridors in Sindh and high solar irradiation across Balochistan and southern Punjab — renewables account for only about 6 percent of Pakistan’s energy mix. Another critical gap noted is the lack of adequate strategic petroleum reserves. Pakistan’s current capacity covers only a few weeks of consumption. Expanding reserves to cover 30–45 days could provide crucial buffer time during global supply disruptions. The report also pointed out the risks of heavy reliance on dollar-denominated trade.
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