ISLAMABAD, April 20, 2026 — Pakistan’s economy remains vulnerable to rising global oil prices triggered by the ongoing Middle East conflict, Federal Minister for Planning, Development and Special Initiatives, Professor Ahsan Iqbal, said on Monday, warning of increased pressure on the country’s external sector despite improving domestic economic indicators.
Speaking during a virtual media briefing at the launch of the Ministry’s Monthly Development Report, Iqbal said Pakistan’s heavy reliance on imported oil — accounting for nearly 70–80 percent of its energy needs — exposed it to global supply disruptions, particularly through key shipping routes such as the Strait of Hormuz.
“The Middle East conflict has emerged as a significant external shock, impacting global growth, inflation and energy markets,” the minister said, adding that higher oil prices could inflate Pakistan’s import bill and widen external imbalances.
Despite these risks, Iqbal noted that Pakistan’s economy had demonstrated resilience during the first eight months of fiscal year 2025–26, supported by easing inflation and a recovery in economic growth.
Inflation slowed to 5.5 percent during July–March, with average inflation recorded at 5.7 percent, while economic growth accelerated to 3.8 percent in the first half of the fiscal year compared to 1.9 percent in the same period last year.
Industrial activity also showed improvement, with large-scale manufacturing expanding by 5.9 percent during July–February, reversing last year’s contraction and reflecting growth across a majority of sectors.
However, the minister cautioned that domestic inflationary pressures had resurfaced, with March inflation rising to 7.3 percent, largely driven by increased energy and transport costs linked to global oil price fluctuations.
Globally, the International Monetary Fund has revised its growth forecast downward to 3.1 percent for 2026, from an earlier projection of 3.3 percent, while global inflation is expected to climb to 4.4 percent, further complicating the outlook for developing economies like Pakistan.
To cushion the impact of rising fuel prices, the government adopted a balanced approach by partially passing on a Rs55 per litre increase in petroleum prices while absorbing an estimated fiscal cost of Rs129 billion. Additional measures, including reductions in petroleum levy and fuel price cuts in April 2026, were introduced to provide relief to consumers.
On the external front, remittances remained a key support, rising 8.2 percent to $30.3 billion during July–March. Exports of goods and services reached $30.6 billion, with services exports increasing 17 percent to $7.3 billion, helping narrow the services deficit.
Imports, however, climbed to $56.3 billion, widening the trade deficit. The current account recorded a surplus of $1.07 billion in March, though the cumulative surplus for the fiscal year to date remained marginal at $8 million, significantly lower than $1.67 billion a year earlier.
Fiscal performance showed improvement, with Federal Board of Revenue collections rising 10.1 percent to Rs9.3 trillion, driven by enhanced enforcement and administrative measures.
Development spending also picked up pace, with Public Sector Development Programme (PSDP) utilization reaching Rs415 billion, around 41–42 percent of total allocations, indicating stronger project execution.
Iqbal said government initiatives, including infrastructure development, international partnerships and investment in emerging sectors such as artificial intelligence, would support long-term growth.
“Despite global uncertainty, Pakistan is moving towards sustained economic stabilization through disciplined reforms and prudent fiscal management,” he said.