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A fresh assessment by the Pakistan Institute of Development Economics has flagged serious risks to Pakistan's economy, warning that any disruption in the Strait of Hormuz could trigger a chain reaction of inflation, currency pressure, and external instability.
The study highlights how deeply dependent Pakistan remains on vulnerable global energy routes, as reported by Geo News. According to Geo News, the report highlights that Pakistan's economic structure is highly exposed to oil supply shocks, with even minor disturbances capable of driving up fuel prices and worsening inflation. The findings reveal that Pakistan's reliance on imported energy leaves it particularly susceptible to external crises. Titled "Pakistan's Exposure to a Strait of Hormuz Shock: Fuel Pricing, Inflation, and External Vulnerability," the research presents a detailed scenario analysis of potential economic fallout. Nearly one-fifth of global petroleum, around 20 million barrels daily, passes through the Strait, making it a strategic chokepoint. Any geopolitical tension or logistical breakdown in the region could instantly send oil prices soaring. For Pakistan, where energy imports make up more than 22% of total imports, the consequences could be severe. The study explains that rising oil prices are only one part of the problem. Freight costs, insurance premiums, currency depreciation, and domestic taxes all combine to inflate final fuel prices, amplifying the burden on consumers. Using scenario-based modelling, the report estimates that even a mild disruption could push inflation close to 9% within months, while more severe shocks could drive it beyond 12%. At the same time, the country's external balance could worsen sharply, with rising import bills weakening the rupee and deepening financial instability, as highlighted by Geo News. The study also points to high-speed diesel as a major driver of inflation, given its central role in transport, agriculture, and food supply chains. Pakistan's economic vulnerabilities are far greater than acknowledged, warning that a Hormuz disruption would not remain an external issue but quickly spiral into a domestic economic crisis, as reported by Geo News. (ANI)
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