KARACHI: The Federation of Pakistan Chambers of Commerce and Industry (FPCCI) on Monday urged the government to formulate an emergency contingency plan to mitigate the economic fallout of the Middle East war, warning that continued disruption to global trade and oil supply could hit Pakistan’s economy hard.
Global oil prices have surged worldwide since the US and Israel carried out coordinated strikes against Iran, prompting Tehran to respond by attacking American interests in the region and closing off the Strait of Hormuz, from where one-fifth of the world’s oil and gas supplies pass through.
Pakistan relies heavily on Middle Eastern crude oil, with the majority of its energy imports typically transiting through the strait. Pakistan fears prolonged closure of the Strait of Hormuz can threaten its fuel reserves and impact its regional trade.
“The FPCCI leadership has urged the government to formulate an emergency contingency plan, including the exploration of B2B barter trade mechanisms with regional partners and securing alternative fuel supply chains,” the FPCCI said in a statement.
FPCCI President Atif Ikram Sheikh warned that soaring freight costs and delayed shipments due to the strait’s closure could derail Pakistan’s economy.
Sheikh noted that commercial vessel traffic through the Strait of Hormuz has stopped, prompting shipping lines to impose “crippling war-risk surcharges.” This, he said, had raised fears of a balance of payments crisis for Pakistan.
The FPCCI president pointed out that 80 percent of Pakistan’s crude oil imports and a quarter of its liquefied natural gas (LNG) transits through the strait.
“Any prolonged disruption will inevitably bleed into our foreign exchange reserves and trigger severe inflationary pressures,” Sheikh said as per the statement.
Sheikh said container freight rates on major shipping routes have skyrocketed since the conflict, adding that shipping lines have imposed war-risk surcharges ranging from $1,500 to $3,500 per standard container.
Sheikh warned that these “logistical bottlenecks” could hurt Pakistan’s premier export sectors as transit durations to key markets in the European Union and the US are expected to increase by 15 to 20 days due to the rerouting of vessels.
“If these supply chain disruptions persist, the value-added textile sector alone could witness a 10 to 20 percent drop in exports this month,” Sheikh said. “And, we cannot afford to have our trade deficit widen under the current IMF program.”
Pakistan has been grappling with a balance of payments crisis since 2023 and has implemented tough reforms mandated by the IMF as part of a $7 billion multi-year loan program.
Saquib Fayyaz Magoon, the FPCCI’s senior vice president, said Pakistan’s recent move to hike petrol and diesel prices by Rs55 per liter each has pushed inland transportation costs up by an estimated 15 to 25 percent.
“Industry representatives argue that standard 30-day fixed inland freight contracts are no longer viable, leaving exporters highly vulnerable to weekly fuel price shocks,” Magoon said.
Pakistan’s government has announced austerity measures, which include closing schools and cutting down on government expenditures as it evaluates its stock of petroleum products while the conflict intensifies.
