KARACHI: Pakistan’s inflation could remain in double digits and exceed 11 per cent if global oil prices continue to rise amid ongoing Middle East tensions, analysts have warned, highlighting mounting risks to the country’s economic outlook.
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According to a report by Topline Securities, persistent high oil prices are likely to increase inflationary pressures, weaken growth, and strain Pakistan’s external account. The report noted that with oil hovering around $100 per barrel, average inflation could remain between 9-10pc over the next year, while prices may climb above 11pc in the fourth quarter of FY26.
The analysis further warned that if oil prices surge to $120 per barrel, annual inflation could reach 10-11pc, prompting the State Bank of Pakistan to consider further interest rate hikes to maintain real returns.
Economic growth is also expected to slow, with GDP expansion projected at 2.5-3.0pc in FY27, down from earlier estimates of 4pc. The brokerage maintained FY26 growth at 3.5-4.0pc in line with revised central bank projections. Sector-wise, industrial growth could drop to 1pc, agriculture to 4pc, and services to 2.8pc if current conditions persist.
Analysts cautioned that Pakistan’s external position remains vulnerable due to its heavy reliance on imported energy, with nearly 85pc of requirements sourced from abroad. Petroleum imports alone are expected to reach $15 billion in FY26, accounting for around 22pc of total imports.
The current account deficit (CAD) for FY27 is projected to stay below $3.5 billion under strict import controls, but could exceed $8 billion if administrative measures are relaxed, posing risks to foreign exchange reserves.
The report also highlighted pressure on financial markets, noting that the Pakistan Stock Exchange has been among the worst-performing global markets in recent months, declining significantly amid geopolitical uncertainty and rising oil prices.
On the fiscal side, the deficit is expected to remain in the 4.0-4.5pc range of GDP in FY26 and FY27, slightly above targets agreed with the International Monetary Fund.
The brokerage advised investors to remain cautious, recommending focus on sectors such as exploration and production, fertilisers, and banking, which may benefit from higher energy prices and interest rates, while warning against exposure to cyclical sectors amid slowing growth.
Additionally, remittances are forecast to decline by 3.5pc, exports by 4pc, and non-oil imports could fall by 8pc in FY27 under government intervention. The Pakistani rupee is expected to depreciate moderately, with projections placing it near Rs294-298 against the dollar by FY27.
Analysts stressed that the trajectory of oil prices and geopolitical developments will remain key determinants of Pakistan’s economic stability in the coming months.
