https://arab.news/9da77
- Pakistan, heavily dependent on remittances, fuel, financing support from Gulf, is vulnerable to conflicts in Middle East region
- Experts say it will likely take months before energy companies resume operations to the point of meeting the world’s demands
ISLAMABAD: The peace deal between the US and Iran will present Pakistan with economic upsides in the next fiscal year, Finance Minister Muhammad Aurangzeb said on Monday, as Islamabad eyes recovering from the financial fallout of the Middle East war that has roiled global energy markets since February.
Financial analysts cite Pakistan as the most vulnerable major Asia-Pacific economy to the Middle East conflict, given its dependence on Gulf energy imports, remittances and financing support from the region.
The US-Iran war and Tehran’s move to virtually shut the Strait of Hormuz maritime trade route since February drove oil prices higher worldwide, inflicting economic damage on heavy fuel importers such as Pakistan. After months of efforts by mediators such as Pakistan, Qatar, Türkiye, Saudi Arabia and others, US President Donald Trump announced early Monday that a peace deal with Iran had been reached.
Speaking at a gong ceremony at the Pakistan Stock Exchange to mark the listing of Service Long March Tyres Limited, Aurangzeb said the peace agreement is “good news” for Pakistan and the region.
“Now, the energy infrastructure has been hit. That’s the reality,” Aurangzeb said in televised remarks. “And therefore, it will take a little while for things to get to normalcy. But it certainly presents us with good upsides in terms of the next fiscal year.”
Experts, however, say it will likely take months before energy companies can resume operations to the point of meeting the world’s demands. The slow pace of the process of shipping and refining crude oil, and doubts about the security of traveling through the strait mean the effect won’t be seen immediately, they say.
The global fuel price hikes came at a crucial time for Pakistan, as it navigates a tricky path to economic recovery under a $7 billion International Monetary Fund (IMF) loan program. The South Asian country has struggled with a balance of payments crisis, low foreign exchange reserves and a weak national currency since 2022 before it posted some economic gains.
To shield masses from the frequent fuel price hikes triggered by the Iran war, Pakistan funded a Rs129 billion ($458 million) fuel subsidy package through spending cuts and payouts from state-owned enterprises in March.
Islamabad played a key role in mediating between the US and Iran, hosting the first round of direct talks between the two states in April. It also relayed messages and peace proposals between Tehran and Washington, with mediators such as Qatar and Türkiye also lending support.