By Abdul Ghani

The recent surge in global oil prices has once again exposed Pakistan’s vulnerability to external energy shocks, increasing pressure on inflation, imports and the broader economy, according to the Ministry of Planning’s Monthly Development Update for May 2026.

The report stated that Dubai crude surged close to $170 per barrel during March 2026 after conflict escalated in the Middle East, sharply increasing global energy and transportation costs.

For Pakistan, which relies heavily on imported fuel, the increase immediately translated into higher import expenses and mounting domestic inflationary pressure.

According to the report, headline inflation accelerated to 10.9 percent in April 2026 compared with only 0.3 percent in April last year.

Higher fuel prices raised transportation costs, utility charges and industrial production expenses across multiple sectors of the economy.

The report noted that rising oil prices also intensified pressure on Pakistan’s external account.

Imports of goods and services increased 8.3 percent to $56.3 billion during July-March FY2025-26, driven partly by a larger petroleum import bill and stronger industrial demand.

As imports rose faster than exports, Pakistan’s current account surplus narrowed sharply to only $0.008 billion during the review period compared with $1.67 billion a year earlier.

The report indicated that Pakistan’s dependence on imported energy continues to create macroeconomic vulnerability during periods of global commodity-price volatility.

At the same time, higher fuel prices affected domestic industrial and consumer sectors.

Transport expenses increased, while energy-intensive industries faced rising operational costs during April 2026.

The report noted that inflationary pressure also spread to food markets through higher logistics and supply-chain expenses.

Despite these pressures, Pakistan’s broader economic recovery continued during FY2025-26.

Large-scale manufacturing expanded 6.5 percent during July-April FY2025-26, while GDP growth accelerated to 3.8 percent during the first half of the fiscal year.

Workers’ remittances increased 8.5 percent to a record $33.9 billion, helping support foreign exchange reserves and external-sector stability.

Foreign exchange reserves also increased to $15.6 billion by May 2, 2026 compared with $14.4 billion at the end of June 2025.

The report stressed that external shocks linked to global energy markets remain a major risk to Pakistan’s economic stability.

The development outlook emphasized the need for prudent fiscal management, efficient energy utilization and stronger external-sector resilience to manage future commodity-price shocks and geopolitical uncertainty.

Credit: INP-WealthPk