Pakistan's economy gasps as Middle East war ignites double-digit inflation
Rising oil prices from the Iran-US war have pushed Pakistan's inflation to double-digit levels. As energy costs surge, Pakistan's trade deficit and current account deficit also widen.
Pakistan's inflation reached 12 percent in April. Rising oil prices have severely impacted energy bills. Increases in electricity and gas tariffs have enlarged the informal economy and expanded the underground sector. Middle-class families have begun tightening household budgets.
Pakistan's oil import budget has increased significantly. The current account deficit has widened from around $400 million monthly before the war to $600 million now. High interest rates, required under IMF agreement, have kept private investment depressed.
The state budget faces mounting pressure. Energy subsidy costs strain public spending while tax revenues decline. Pakistan has become dependent on IMF support and forced to accept IMF conditions. Medium-term expectations point to declining social spending and reduced education budgets.
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