KARACHI, May 2, 2026– Pakistan inflation could rise by 50 basis points for every $10 per barrel increase in global oil prices, intensifying economic pressures amid ongoing geopolitical tensions, according to a report by Topline Securities Limited.
The brokerage said rising energy costs are likely to keep inflation elevated if current conditions persist, with average inflation projected at 9–10% over the next 12 months, assuming oil prices hover around $100 per barrel.
“If oil prices climb to $120 per barrel, average inflation could increase to 10–11%, potentially necessitating further policy tightening to maintain real interest rates,” the report said.
The outlook comes as global oil markets remain volatile due to conflict in the Middle East, raising concerns for oil-importing economies such as Pakistan.
Higher energy prices are also expected to weigh on economic growth. The report revised Pakistan’s GDP growth forecast for fiscal year 2027 to 2.5–3.0%, down from an earlier estimate of around 4.0%. Growth for fiscal year 2026 is projected to remain in the 3.5–4.0% range, broadly in line with guidance from the State Bank of Pakistan.
Pakistan imports around 85% of its energy needs, making it highly sensitive to fluctuations in global oil prices. Petroleum imports are estimated at around $15 billion for FY26, accounting for roughly one-fifth of total imports.
The report warned that external balances could come under strain. The current account deficit is expected to remain below $3.5 billion, or 0.8% of GDP, if administrative measures are maintained. However, weaker controls on imports could widen the deficit to over $8 billion, posing risks to foreign exchange reserves.
Fiscal pressures are also likely to persist, with the consolidated budget deficit projected at 4.0–4.5% of GDP in FY26 and FY27, compared with a 4.0% target under the International Monetary Fund programme.
On the currency front, the Pakistani rupee is expected to depreciate by an average of 5–6% in FY27 under a controlled scenario, though sharper declines could occur if external imbalances worsen.
Pakistan’s stock market has already reflected investor concerns, ranking among the worst-performing globally in the March 2026 quarter, amid rising oil prices and regional uncertainty.
The report recommended a cautious investment strategy, favoring energy, fertilizer and banking sectors, while advising against cyclical stocks that could be hit by slower economic growth.
Analysts also flagged risks from rising non-oil imports, which are projected to reach near-record levels in FY26, and a potential decline in remittances from Gulf countries, further complicating the economic outlook.