Soaring fuel prices in Pakistan threaten economic and political crises

A huge increase in Pakistan’s fuel import bill from $300 to $800 billion is putting more pressure on the economy.The most serious fuel price shock to hit Pakistan in more than half a century threatens to unleash a flood of cascading crises that could batter all aspects of the economy and undermine the government of Prime Minister Shehbaz Sharif.Earlier this week, Sharif said Pakistan’s oil import bill had surged from $300 million before the conflict to $800 million now, which he said erased all the economic progress the country had made over the past two years. Analysts say the knock-on effects will be increasingly severe, impacting everything from agriculture and transport to the price of food and basic goods, worsening the plight of families already facing a cost-of-living crisis.Recommended Stories list of 3 itemslist 1 of 3Iranian FM Araghchi to visit Pakistan, as talks with US set to resumelist 2 of 3Oil prices rise despite Iran’s proposal to reopen Strait of Hormuzlist 3 of 3Iran-Iraq Tanker War redux? Why the Strait of Hormuz crisis is differentend of list“Conventional economics tells us that oil price hikes trigger a chain reaction across the economy,” economist Kamran Butt told the Dawn newspaper. “They increase transportation costs, push up the prices of daily-use commodities and food items, raise the overall cost of living, reduce purchasing power, increase poverty and unemployment, slow economic activity and eventually fuel public discontent as quality of life deteriorates.”The State Bank of Pakistan raised its key policy rate by a full percentage point to 11.5 percent.The bank said: “The Committee noted that prolonging the Middle East conflict has intensified risks to the macroeconomic outlook. In particular, the global energy prices, freight charges and insurance premiums continue to remain significantly above pre-conflict levels. Furthermore, the supply chain disruptions have contributed to the prevailing uncertainty.”