‘Surviving loan by loan’: Pakistan’s wallet could take another hit from soaring oil prices

As the Middle East war continues to escalate, tensions are mounting for the South Asian nation of Pakistan. The country is facing an economic crisis as Iran has disrupted fuel shipments through the Strait of Hormuz, its main oil supply route. Pakistan relies on Saudi Arabia and the United Arab Emirates for over 85% of its crude oil, most of which passes through this single maritime corridor. Recent attacks on at least 16 ships, including tankers, have slowed traffic, leaving vessels stranded in Karachi, the nation’s key commercial port.



The supply disruption has pushed fuel prices higher around the world. Pakistan's finance minister Muhammad Aurangzeb had earlier predicted that the country could see its monthly oil import bill soar to a whopping $600 million as prices continue to jump.




Rising oilcosts are affecting farmers preparing for the spring harvest. “The use of tractors and other agricultural machinery is unavoidable at most stages of cultivation and harvesting, and these largely run on diesel,” said Aamer Hayat Bhandara, a farmer from Punjab’s Pakpattan district. Agriculture accounts for over 23% of Pakistan’s gross domestic product and employs 37% of the labour force, making the sector particularly vulnerable to price shocks.

At the same time, city residents are no stranger to the crisis. Diesel-powered rickshaws, taxis, and commuter vehicles have become more expensive to operate. “They could have gotten oil from Russia,” Muhammad Roshan, a rickshaw driver in Rawalpindi, told New York Times. “Why haven’t they explored that opportunity?”

The government increased fuel prices by 20% onMarch 6 to curb hoarding, marking one of the steepest rises worldwide since the start of the US-Israeli war in Iran. The move has hit households hard, particularly in a country where nearly half the population lives in poverty, according to World Bank estimates.

'Surviving loan by loan'

Economists warn of wider consequences if the crisis continues. “Pakistan is already bankrupt and surviving loan by loan,” said Kaiser Bengali, a Pakistani economist referring to IMF assistance. “Any prolonged disruption could topple its economy.”

Retail activity ahead of Eid has slowed, with many customers prioritising essentials. “There is no such rush in the markets,” said Shabbir Ahmed, a clothing trader in Karachi.

With energy supplies constrained and prices rising, Pakistan’s rural and urban populations are bracing for a challenging period ahead, where livelihoods, education, and traditional festivities are all being affected.

Dealing with the supply shock

Some schools are shifting to online learning, though many children lack access to laptops, tablets, or reliable internet. Families are cancelling trips for Eid al-Fitr, typically a time of celebration at the end of Ramadan. Ali Akbar, a real estate worker in Islamabad, said he is postponing a homecoming trip and considering moving his children to a school within walking distance. “Monthly transportation costs for them have already risen to $48 from $36 over the past week,” he said.

Pakistan has attempted to mitigate shortages through domestic measures, including promoting solar power for electricity production and reducing official trips and the workweek. Authorities have also sought Saudi Arabia’s help to supply oil via Red Sea ports. Still, economists caution that cutting workdays may hurt daily-wage earners and middle-class families.

As it economy suffers, the country is treading carefully on the diplomatic front as its economy suffers. The government has worked to bolster relations with the Trump administration while avoiding criticism of the United States’ strikes on Iran. To ease the energy crunch, Pakistan has asked Saudi Arabia to route oil shipments through its Red Sea ports.

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