Oil Price Surge Puts Pakistan’s Economy Under Pressure: BMP

By Muhammad Shahzad, Lahore
LAHORE: The Businessmen Panel (BMP) of the Federation of Pakistan Chambers of Commerce and Industry (FPCCI) has expressed deep concern over the ongoing surge in global oil prices, warning that it poses a serious threat to Pakistan’s economic stability, industrial growth, and external balance.
FPCCI President and BMP Chairman, Mian Anjum Nisar, cautioned that rising oil prices amid Middle East tensions are already translating into higher inflation, increased production costs, and mounting pressure on the country’s fragile economy.
In a detailed statement, he noted that Pakistan, which relies heavily on imported energy, remains highly vulnerable to external shocks such as oil price spikes. “When international oil prices rise, it directly impacts our import bill, exchange rate, and overall inflation, creating a chain reaction that affects every sector of the economy,” he said.
Referring to recent economic assessments, BMP highlighted that inflation could remain in double digits if oil prices stay elevated, with projections suggesting it may exceed 11 percent in the coming months. Rising fuel prices, transportation costs, and electricity tariffs are already eroding consumers’ purchasing power and increasing the financial burden on businesses.
The panel warned that higher energy costs would significantly affect industrial productivity, as manufacturers struggle with escalating input prices. Export-oriented sectors, heavily dependent on energy, risk losing competitiveness in global markets if production costs continue to rise.
Mian Anjum Nisar emphasized that the economic outlook is becoming increasingly uncertain, with growth projections already being revised downward. “If the current trend continues, Pakistan’s GDP growth could slow considerably, affecting employment, investment, and overall economic momentum,” he said.
He added that industrial growth—one of the main drivers of economic expansion—is likely to weaken due to rising costs and declining demand. Similarly, the services sector may experience a slowdown as consumer spending decreases in response to inflation.
The BMP chairman also raised concerns about the widening current account deficit (CAD), noting that higher oil imports could push it beyond manageable levels. “Foreign exchange reserves are already under pressure. A sustained rise in oil prices could further strain the external account and create instability in the currency market,” he warned.
BMP urged the government to implement prudent import management policies while ensuring the availability of essential industrial inputs. Mian Anjum Nisar also highlighted the potential pressure on the exchange rate, cautioning that continued external account stress could lead to further depreciation of the Pakistani rupee, making imports more expensive and intensifying inflation.
He stressed the need for a balanced and proactive policy response, including fiscal discipline, targeted subsidies, and support for key industries. The panel also expressed concern over the State Bank of Pakistan’s recent increase in the policy rate, arguing that higher interest rates could further slow economic activity.
“Monetary tightening alone cannot address supply-driven inflation caused by external factors like oil prices. Higher interest rates raise borrowing costs, discourage investment, and hamper business expansion,” he said.
BMP recommended enhancing domestic energy production to reduce reliance on imported fuels, alongside investing in renewable energy sources such as solar and wind to mitigate the impact of global price fluctuations in the long term.
The panel also called for incentives to boost exports and attract foreign investment, emphasizing the need for policy consistency and transparency to maintain investor confidence.
Mian Anjum Nisar urged authorities to provide relief to small and medium enterprises (SMEs), describing them as the backbone of the economy. “Supporting SMEs during this challenging period is essential for sustaining economic activity and employment,” he said.
BMP further noted that the stock market has shown volatility due to rising oil prices and geopolitical tensions, advising investors to remain cautious while identifying opportunities in sectors that may benefit from higher commodity prices.
He concluded by stressing the importance of coordinated efforts between the government, central bank, and the business community to navigate current economic challenges. “With the right policies and collective effort, Pakistan can overcome this difficult phase and move towards economic stability and sustainable growth,” he said.