Pakistan Economy Faces Pressure After Fuel Price Hike

Pakistan’s economy is likely to suffer after the government raised fuel prices by more than 20 percent. Economists and industry leaders warned that higher fuel costs could slow growth, raise inflation, and hurt exports. The increase comes as global oil prices spike due to the Middle East conflict involving Iran, Israel, and the U.S.

On Friday, the government increased petrol and diesel prices by Rs55 ($0.20) per liter each. Petrol now costs Rs321.17 per liter, while diesel is Rs335.86 per liter. The hikes reflect international oil price surges, which rose 37 percent to about $106.8 per barrel since March 1. Diesel prices have reached roughly $150 per barrel amid ongoing disruptions.

Muhammad Saad Ali, head of research at Lucky Investments Ltd., said Pakistan’s economic growth was already slow. He warned that the recent fuel hike will further reduce growth momentum. Ali noted that GDP growth could fall below the projected 4 percent next year if fuel prices remain high.

The State Bank of Pakistan had previously forecasted improved growth of 3.75-4.75 percent for the current fiscal year. The central bank expects further growth in FY27 due to improving economic activity. However, the recent surge in fuel prices could undermine these forecasts.

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Ali also highlighted the impact on consumer price inflation, which reached 7 percent last month, marking a 16-month high. He predicted that inflation could rise another 0.7 to 1 percent in the coming months. This means prices could increase to 8-9 percent by May or June due to base effects.

He warned that higher inflation will reduce consumer spending as households cut back on expenses. The central bank has repeatedly emphasized that rising fuel costs will affect both inflation and economic stability. The effect could be more pronounced if oil prices remain elevated globally.

Pakistan’s finance adviser Khurram Schehzad and finance ministry spokesperson Qamar Sarwar Abbasi did not respond to requests for comment. Meanwhile, economists continue to monitor fuel price impacts on growth, inflation, and exports closely.