| Impact Category | Pakistan |
|---|
| Energy supply shock | Short: severe vulnerability. Pakistan would face an immediate oil import cost shock and likely LNG stress because Qatar’s LNG exports transit Hormuz and Pakistan relies materially on imported LNG. Power generation, industry, transport, and fertilizer would all come under pressure fast. Medium: forced substitution toward coal, domestic gas where possible, demand curtailment, and administrative rationing. Import compression would likely return. Long: stronger push for domestic energy, renewables, transmission upgrades, and reduced LNG/oil dependence, but progress would be constrained by financing. |
| Oil / gas price level | Short: domestic petrol, diesel, furnace oil, and likely electricity/gas tariffs would jump sharply unless the government absorbed part of the increase fiscally. Pakistan would not control the global oil price and would be forced to pay much more in dollars. Medium: prices stay elevated even if initial panic fades, because Pakistan is a price taker with weak bargaining power in a global scramble for non-Middle East barrels and LNG. Long: structurally higher energy costs unless Pakistan meaningfully changes its fuel mix. |
| Balance of payments / FX reserves | Short: this is the most dangerous channel. Pakistan’s import bill would rise abruptly, the current account would swing back toward deficit, and the rupee would come under depreciation pressure. FY25’s external improvement was helped by lower oil prices and strong remittances; both cushions would weaken in this scenario. Medium: reserve pressure, tighter import controls, possible emergency financing, and renewed IMF dependence become likely. Long: Pakistan would seek longer-term non-Middle East supply contracts and harder import discipline, but external fragility would remain a central constraint. |
| Inflation | Short: fuel inflation would pass quickly into transport, food, fertilizer, and electricity. Pakistan had recently brought inflation down sharply, so this shock would be a major reversal. Medium: broad-based inflation becomes sticky as higher import, freight, and energy costs spread across the economy. Long: inflation sensitivity to oil remains high unless the economy electrifies and improves productivity much more than at present. |
| GDP growth | Short: growth would weaken quickly as household purchasing power falls and firms face higher energy and imported-input costs. Medium: Pakistan would be at high risk of another stop-go stabilization phase: slower growth, compressed imports, weak industrial activity, and pressure on fiscal policy. Large-scale manufacturing was already fragile in FY25, which would make the shock harder to absorb. Long: growth would likely settle below potential unless Pakistan can reduce imported-energy intensity. |
| Industry and power sector | Short: the most exposed sectors would be power, textiles, fertilizer, transport, cement, and other energy-intensive industries. Gas curtailments and imported fuel cost spikes could trigger rolling disruptions. Pakistan’s LNG system was already strained enough in 2025 that the cabinet approved diversion of 45 cargoes and gas allocation issues remained politically sensitive. Medium: industry faces lower utilization, higher working-capital needs, and more shutdowns/curtailment. Export competitiveness suffers. Long: stronger incentive to shift toward local coal, hydro, solar, and efficiency. |
| Employment | Short: transport workers, small manufacturers, and informal urban labor would feel the first pain through fuel and food costs. Medium: layoffs or reduced hours would likely spread through manufacturing and logistics as growth slows. Long: some employment may shift toward domestic energy, grid, and renewables projects, but that would not offset short-run labor pain quickly. |
| Fiscal policy / government response | Short: Islamabad would likely face a hard choice: pass through higher fuel prices and risk unrest, or subsidize and blow out the fiscal position. Strategic stock releases would be much less powerful than in richer countries. Medium: expect import controls, tariff adjustments, targeted subsidies, possibly energy arrears rising again, and renewed negotiation with lenders. Pakistan’s IMF program would become even more central. Long: more emphasis on energy security, tax collection, and subsidy reform — though implementation risk would stay high. |
| Exchange rate / financial markets | Short: the rupee would likely weaken, sovereign spreads would widen, and local markets would price in inflation plus external stress. Medium: tighter monetary policy or at least delayed easing would become more likely if the currency weakens and inflation re-accelerates. The SBP’s February 2026 baseline of 5–7% inflation would likely be blown off course by such a shock. Long: chronic external-risk premium stays elevated unless Pakistan builds a much stronger reserve and export base. |
| Remittances | Short: remittances probably would not collapse immediately; migrant workers usually keep sending money at first, and families at home may need more support. Medium: this becomes a real second-wave risk. Because Saudi Arabia and the UAE alone accounted for about 45% of FY25 remittances, a prolonged Gulf slowdown or fiscal tightening would hurt Pakistan’s inflows materially. Long: Pakistan would want broader migration-market diversification, but Gulf dependence would remain significant for years. |
| Social effects | Short: immediate pain would show up in higher petrol prices, bus and trucking fares, food inflation, generator costs, and more electricity/gas complaints. Medium: risks include protests, pressure over utility bills, labor unrest, and greater strain on lower-income households already vulnerable to inflation shocks. Long: persistent public frustration could deepen distrust of economic management unless the state delivers a more secure domestic energy base. |
| Energy transition / strategic adjustment | Short: emergency measures, not transition, would dominate. Medium: more appetite for solar, storage, hydro, grid upgrades, and local resource development would emerge. Long: Pakistan would probably conclude that imported oil/LNG dependence is a national-security vulnerability — but capital scarcity means adjustment would be slower than in China, Europe, or the U.S. |
