Summary IMF warns Middle East conflict may cut Pakistan GDP growth by 0.6%, impact current account and raise inflation as oil prices surge and economic risks increase amid global uncertainty.
NEW YORK (Web Desk) - The International Monetary Fund has warned of a potential slowdown in Pakistan’s economic growth due to the Middle East conflict.
According to its Regional Economic Outlook report, Pakistan’s GDP growth could decline by around 0.6 percent amid the ongoing tensions.
The report highlights possible negative impacts on Pakistan’s current account and fiscal balance, with the current account expected to be affected by approximately 0.3 percent.
It further noted that Pakistan’s $7.2 billion programme is focused on economic stability and reforms.
Rising oil prices are likely to increase pressure on the economy and inflation, with a 10 percent increase in oil prices potentially causing further economic damage and price hikes.
The International Monetary Fund also pointed out that Pakistan’s heavy reliance on oil imports and remittances from Gulf countries poses additional risks.
In case of a prolonged conflict, trade flows and remittances could be adversely affected. Borrowing costs for Pakistan have already increased, and further deterioration in global financial conditions may intensify economic pressure.
The report added that high debt levels and banks’ investment in government securities could raise financial risks.
Closure of the Strait of Hormuz and escalation in conflict have pushed oil prices above $100 per barrel. While a ceasefire in the region is a positive development, uncertainty still persists.
