Pakistan’s economic outlook is facing renewed pressure as global tensions push up energy costs and raise the risk of higher inflation in the months ahead, according to the State Bank of Pakistan’s latest assessment.
In its post-policy statement, the central bank signalled that external shocks linked to the ongoing Middle East conflict are beginning to filter into the domestic economy. It noted that global oil prices, freight charges and insurance costs remain elevated, adding strain to import bills and supply chains.
The central bank expects these pressures to drive inflation higher in the near term, with the possibility of it entering double digits before easing later. It also warned that price growth is likely to stay above its 5 to 7 percent target range for much of the next fiscal year.
Growth outlook softens
While the economy has shown some resilience, signs of slowdown are emerging. Real GDP grew 3.8 percent in the first half of the fiscal year, but recent data suggests moderation in industrial and services activity.
Agriculture is also under pressure, mainly due to lower than expected wheat output. The central bank said these factors, along with the spillover impact of global uncertainty, could keep full-year growth closer to the lower end of earlier projections.
The outlook for the next fiscal year remains uncertain and depends heavily on how long global tensions persist.
External position offers some support
Despite these challenges, Pakistan’s external position has shown some improvement. The current account remained in slight surplus during the first nine months of the fiscal year, while foreign exchange reserves stood near $15.8 billion in late April.
The central bank expects reserves to cross $18 billion by June, supported by recent access to international capital markets.
Fiscal pressures rise
On the fiscal side, rising oil prices are making budget management more difficult. The government may need to continue targeted subsidies to shield low-income groups, which could widen spending pressures.
The central bank said keeping fiscal discipline and building external buffers will be key to managing risks and supporting long-term growth as global uncertainty continues.
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