KARACHI: When Pakistan’s former prime minister Imran Khan visited Moscow on February 24 last year, he did not realize that the man he was to meet in Kremlin was about to press the war button and his country would bear its brunt. A year on, the estimates indicate that the war has cost his country 1 percent of its economic growth.
The Russian invasion, which entered its second year on Friday with no end in sight, coincided with Khan’s visit to Moscow and has hit Pakistan hardest in terms of diplomatic relations with the West and economically at home.
The conflict disrupted the global supply-chain network and led to an international hike in oil price. It came at a time when the South Asian country was recovering from the impacts of the COVID-19 pandemic and, according to economists, has dented Pakistan’s economy in various ways.
“The first major impact of the Russia-Ukraine war was that Pakistan’s energy import bill inflated substantially and increased the cost of production which triggered huge inflationary pressure in the country,” Dr. Sajid Amin, a deputy executive director at the Sustainable Development Policy Institute (SDPI), told Arab News.
“We estimate that the war has directly contributed 8-9 percent to current inflation rate in Pakistan as oil and food commodities prices shoot up in the global market after a war.”
The South Asian nation is currently experiencing multi-decade high inflation that was recorded at 27.6 percent in January and is projected to hit as high as 40 percent in coming days.
“The war has had severe impact in terms of commodity price hikes, termed as the commodities super cycle, which coincided with the opening of the industrial world after COVID and the shortage caused by the Russian-Ukraine war,” Dr. Khaqan Najeeb, a former adviser to the Pakistani finance ministry, told Arab News.
The increase in Pakistan’s overall energy bill pushed the country’s current account deficit (CAD) beyond $17.4 billion, impacting its reserves that were already dwindling since December 2021, according to Najeeb.
“Coupled with fund delays, Pakistan’s balance of payment remained challenging and continues to do so even today,” he added.
Pakistan’s petroleum import bill remained $23.3 billion in the last fiscal year (FY22), which was 105 percent higher than the previous year, while the country has imported energy products worth $10.6 billion during the first seven months of this current fiscal year (FY23), according to official data.
Economists say 1 percent of Pakistan’s gross domestic product (GDP) has directly suffered because of the Russian invasion of Ukraine.
“The GDP loss that has been globally estimated by many institutions is 1 percent due to the Russia-Ukraine conflict,” Amin said.
“Our estimates show that it has increased unemployment in Pakistan and pushed roughly 3.5 million people below the poverty line.”
The conflict, through oil and food price hikes, has severely impacted the life of a commoner in Pakistan.
“Particularly, the poor segment that spends 60-70 percent of their income on food basket,” Amin said.
“Those who were close to the poverty line have slipped below the poverty line and at the same time, employment opportunities have diminished amid monetary and fiscal policy tightening.”
The most important fact, according to Pakistani economists, is that the impacts of the Russian invasion will continue to haunt Pakistan for the next five years.
“Our estimates suggest that the war impacts will continue to persist until 2026-27, also because of the International Monetary Fund (IMF) program and contractionary monetary policy,” Amin said.
As cash-strapped Pakistan continues to suffer at the economic front, experts say the country has faced setbacks on the diplomatic front as well.
“Pakistan has suffered from the almost exclusive focus of the US and Western countries on the war in Ukraine. These countries have little time and energy left to pay attention to other problem spots around the world, including Pakistan,” Husain Haqqani, a former Pakistani ambassador to the US who is currently a scholar at the Anwar Gargash Diplomatic Academy in Abu Dhabi, told Arab News.
“The fact that former prime minister Imran Khan chose to stand beside President Putin in Moscow on the day Russia invaded Ukraine further diminished Pakistan’s ties with the West.”
Haqqani said though Pakistan has move on but the war has caused it economic and political damages.
“Pakistan has moved on from that moment but the Ukraine war has hurt Pakistan economically as well as politically,” he said.
“Politically, Pakistan’s loss has come from the lack of ability of major Western leaders to attend to Pakistan and its neighborhood because their attention is on the war in Ukraine.”
As Russia-Ukraine conflict continues to fuel volatility in the global commodity market, Pakistani authorities are striving to import petroleum products and Russian oil at discounted rates.
“Pakistan has now tried to take advantage of price tact, Russian crude and refined products. Let’s hope that it does materialize,” Najeeb said.
“The price that has been quoted informally around $60 a barrel may help bring down Pakistan’s imported energy costs and ease the balance-of-payment pressure as we move forward.”
Pakistani authorities expect to import Russian refined oil from March this year, expecting that Moscow will provide cheap energy alternates to energy-deficient Pakistan.