Potential fallout of Israel-Iran conflict: ICMAP for ensuring 90-day strategic oil reserves
In response to escalating regional tensions, the ICMAP has issued a timely and policy-focused assessment of the potential economic fallout from the ongoing Israel-Iran conflict. Developed by ICMAP's Research and Publications Department, the report complements the government's recent decision to establish a high-level committee, headed by the Finance Minister, to evaluate emerging economic risks.
ICMAP's assessment underscores that while the conflict remains geographically limited, its indirect economic consequences are already rippling across global markets, particularly affecting energy, trade, and financial systems. For Pakistan, the exposure is significant due to its dependence on imported fuel, critical maritime trade routes through the Gulf, and the livelihoods of over four million expatriate workers based in the Middle East.
Central to the analysis is a warning that any disruption in the Strait of Hormuz, through which nearly 20% of global oil and LNG transit, could drive oil prices to between $100 and $130 per barrel. This would substantially increase Pakistan's energy import bill, elevate power generation costs, and accelerate inflation. Domestic diesel prices could rise by more than 30%, with wide-ranging effects on food production, transportation, and household expenditures.
The report further highlights rising risks to financial stability. Depreciation of the Pakistani Rupee, increased external debt servicing costs, and fiscal pressure from potential fuel subsidies could erode macroeconomic resilience. Exporters are already facing sharp increases in shipping insurance premiums, reportedly climbing from $400 to $2,000 per container, thereby undermining export competitiveness. In addition, supply chain disruptions and elevated freight charges are expected to impact industrial production - particularly in key sectors such as textiles, chemicals, and edible oils.
To address these challenges, ICMAP has outlined a set of strategic policy recommendations. At the forefront is the proposal to establish a Strategic Economic Task Force comprising the Ministry of Finance, Ministry of Commerce, Ministry of Energy (Petroleum Division), Ministry of Foreign Affairs, Ministry of Planning, Development and Special Initiatives, Ministry of Defence, and the State Bank of Pakistan. This high-level task force would be responsible for monitoring global developments and coordinating timely, cross-institutional policy responses to safeguard Pakistan's economic stability.
The Institute also recommends expanding Pakistan's strategic petroleum reserves from the current 21 days to at least 90 days of national demand. This critical buffer could be financed through sovereign Sukuk, modelled after successful international practices, to enhance energy security and reduce vulnerability to global supply shocks.
Additional recommendations include the adoption of Shariah-compliant oil price hedging instruments for up to 30% of imports to manage exposure to international price volatility. ICMAP also advocates diversifying oil procurement by pursuing local currency trade agreements with countries such as Russia, Iran, and China. Accelerating the modernization of local oil refineries is also advised, which could reduce reliance on imported refined fuels and potentially save up to $1 billion annually.
ICMAP further recommends for reversing recent taxes on solar panel imports and fast-tracking the implementation of the 10,000 MW Solar Initiative to promote clean energy and enhance long-term energy resilience.
On the external front, it emphasizes the need to safeguard overseas remittances by engaging Gulf countries, incentivizing formal remittance channels, and supporting returning workers to sustain household incomes and foreign exchange inflows.
ICMAP further suggests applying for financing under the IMF's Resilience and Sustainability Trust (RST) and establishing an Energy Shock Stabilization Fund in collaboration with multilateral development partners to strengthen fiscal buffers.
Copyright Business Recorder, 2025
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Business Recorder
a day ago
- Business Recorder
ADNOC restores most Murban oil supply to equity holders in July, sources say
SINGAPORE: Abu Dhabi National Oil Company (ADNOC) has restored most of the Murban crude oil supply going to equity holders in July after making a sharp cut earlier, multiple trade sources said on Thursday. During the Israel-Iran conflict last month, ADNOC notified equity holders that it would cut their Murban crude supply by 3 million to 4 million barrels in July, the sources said. Most of these volumes have since been restored, they said. ADNOC did not immediately respond to a request for comment. It was not immediately clear what led to these changes. ADNOC makes first trades during Platts Dubai oil pricing process, traders say Partners in ADNOC Onshore, the subsidiary which produces Murban crude, include BP, TotalEnergies, China National Petroleum Corp (CNPC), Inpex, Zhenhua Oil, and South Korea's GS Energy. Equity holders are entitled to about 40% of the flagship grade's production which stands at around 2.1 million barrels per day, traders said. Japan, Thailand and India are the biggest importers of Murban crude, Kpler data showed.
Business Recorder
a day ago
- Business Recorder
Yet another chance to reset the future
On the morning of June 27, the Swat River, usually a tranquil ribbon winding through the valleys, suddenly roared to life. Families who had gathered by its banks found themselves fighting a wall of water. Within minutes, around a dozen lives were lost. Sirens never blared, rescue helicopters never arrived, and administrative teams showed up only after the river had receded, leaving homes and hopes in ruins. Pakistan is now among the world's most climate vulnerable countries, with 2022 floods alone causing nearly $15 billion in damages, this underscores the urgent need for flood defenses, real-time warning systems, and strict land use regulation to prevent escalating monsoon disasters. Only weeks earlier, Pakistan had leapt onto the global stage by prevailing in a four-day exchange with India in the month of May. What began as tit-for-tat strikes over the Pahalgam false flag could have unravelled our unity. Instead, our air force once more reestablished its air supremacy, our military forces stood firm, rival parties paused their quarrels, and even Washington and Beijing urged calm. In that ordeal, Pakistan emerged victorious, and more importantly, unified. We almost got this glory furthered as an important regional and global player in Iran-Israel conflict. This stark contrast: vulnerability was laid bare and strength reclaimed, offers another chance for our nation. Out of nowhere, we have regained serious traction: as a stabilizer in South Asia, as a trusted partner in the Islamic world on security and development, and as a country capable of both weathering storms and commanding respect. The real challenge is to turn this fleeting goodwill into lasting prosperity. In my last column titled 'The Missed Century', I emphasized that no South Asian nation prospers in isolation. Reviving that promise requires a new imagination of integration. The China–Pakistan Economic Corridor must evolve from isolated highways into a mesh of trade and energy connectivity, westward into Afghanistan and Central Asia, and, when the time is right, eastward toward India. Our engagement with BRICS+ should go beyond observer status; it must translate into technology transfers in agritech, digital finance, and renewable energy; co-financed, co-managed, and locally adapted. Since independence, Pakistan has struggled to build a resilient economy: its path repeatedly derailed by entrenched patronage networks and chronically misaligned priorities. Despite receiving major aid during the Cold War and post-9/11 eras, the country failed to translate this support into gains in agricultural productivity or industrial capacity. Instead, consumption surged while structural fundamentals stagnated. Today, the economy remains trapped in a cycle of circular debt, periodic bailouts, and policy inertia. A rent-seeking political economy lies at the core of this dysfunction, where vested interests have hollowed out institutions, undermined regulatory oversight, and crippled the state's capacity to deliver basic services. As of March 2025, public debt has reached PKR 74 trillion (68 percent of GDP), with debt servicing costs crowding out development spending and constraining every budgetary choice. Pakistan's Gross National Savings Rate, at just 13 percent (2023), is the lowest in South Asia (compared to 35 percent in Bangladesh, 31 percent in India, and 27 percent in Sri Lanka). Exports remain stuck around US$ 30 billion, while rising imports widen the trade deficit and erode reserves, if it weren't for remittances from expats, the situation wouldn't remain sustainable even for three months. Meanwhile, state-owned enterprises like PIA, Pakistan Railways, and the DISCOs have cost the exchequer PKR 5.8 trillion in cumulative losses. Inequality is stark: the top 10 percent of households control 60 percent of national wealth and 43 percent of total income, while half the population owns no land and just 5 percent of assets. Reversing this decline demands vision and discipline. The illusion of reform-through-austerity must be replaced with genuine fiscal and governance restructuring. Reform of the National Finance Commission (NFC) is vital to ensure equitable, development-focused allocations. Local governments must be empowered; the federal and provincial bureaucracies trimmed; and loss-making SOEs either privatized or restructured. In the energy sector, a strategic shift toward hydropower, solar, and nuclear, coupled with efforts to cut transmission losses (18% in FY24), can ease pressure on public finances and improve supply stability. An inclusive Islamisation of the economy is now an imperative — not as tokenism, but as a lever for social equity and domestic capital mobilisation. Tools like Zakat and Ushr can help formalize the informal sector, broaden the tax base, and enhance welfare delivery. To put it in perspective, approximately PKR 2 trillion of additional federal revenue can be generated from applying Ushr on annual basis. At the same time, infrastructure financing must increasingly rely on sukuk instruments, reducing dependence on interest-bearing debt while unlocking Shariah-compliant capital. At least 50 percent of Pakistan's debt should be reprofiled toward sukuks, paving the way for sustainable growth rooted in ethical finance. With the right strategic alignment, Pakistan can position itself as a regional hub for Shariah-compliant green finance and a model for Islamic development that is modern, inclusive, and sustainable. These measures must be reinforced through institutional reforms of the FBR, Board of Investment, and Planning Commission to expand fiscal capacity and reduce inefficiencies. Following diplomatic gains in May 2025, Pakistan must negotiate a five-year debt rollover; not merely for short-term liquidity relief, but to create fiscal space for critical investments in education, healthcare, and flood resilience. Yet even this window will close quickly if institutions remain hamstrung by corruption and mismanagement. Pakistan scored just 27/100 on Transparency International's 2024 Corruption Perceptions Index, ranking 135th out of 180 countries. Small and medium enterprises continue to face suffocating bureaucratic red tape, while foreign direct investment, just US$ 1.78 billion in Jul–Apr FY25, remains far below the levels needed to drive sustainable growth. To attract serious capital, Pakistan must produce international-standard, dollar-based, bankable feasibility studies, particularly in energy, mines & minerals, tourism, logistics, and agribusiness. This effort must be supported by streamlined approvals, transparent cross-ministerial coordination, and consistent federal–provincial alignment. A unified, pro-investment posture is no longer optional; it is the precondition for economic recovery and long-term resilience. And while we look forward, we must also look inward. We cannot afford to repeat the patterns of crippled democratic regimes or that of Ayub's entitlement, Yahya's recklessness, Zia's paranoia, or Musharraf's ad hocism. Each era, in its own way, mortgaged our future: sometimes to foreign capital, sometimes to internal repression, and often to miscalculated wars or fleeting global favor. We cannot afford another lost decade. Reform must be institutional, not individual; strategic, not opportunistic; and inclusive, not elitist. As Lee Kuan Yew declared in his final National Day Rally, 'We are going to live only one life. If we have to die, we will die for a cause.' That cause today is a Pakistan that seizes this golden opportunity: turning trials into triumphs, rebuilding stronger, and harnessing the traction we have unexpectedly regained across South Asia, the Islamic world, and beyond. But to translate this moment into lasting transformation, we must heed another of Lee's enduring calls: 'Get our ablest and our best into politics.' The time has come to abandon apathy, cynicism, and mediocrity. Pakistan's revival demands competence, meritocracy, and courage to lead from the front. History will judge us not by the storms we endure or the skirmishes we survive, but by the resolve we show in responding to them. It is rare for a nation on the brink to be pulled back into the fold of global relevance; rarer still is one that recognizes the moment and rises to meet it. Pakistan must now choose not survival, but purpose. And this — perhaps our last — is yet another chance. Copyright Business Recorder, 2025
Express Tribune
2 days ago
- Express Tribune
CPEC to CPAEC: aspiration to actualisation
Listen to article If Afghanistan joins CPEC, the entwined destinies of the peoples of Pakistan and Afghanistan could bring socioeconomic development, improve bilateral relations and usher peace and stability in the region. This was the focus of my PhD (2017-2021). Though it seemed unlikely then, but a few developments strengthened the hopes. Firstly, on Sept 8, 2019, in a Pakistan-Afghanistan-China trilateral meeting, construction of Peshawar-Kabul motorway under the banner of China-Afghanistan-Pakistan Plus Cooperation (CAPPC) was agreed to. This aimed at jointly working towards promoting trade and connectivity. It was perceived as a move paving the way for Afghanistan joining CPEC. Second was the signing of China-Iran comprehensive partnership MoU in 2020. Estimated at $400 billion, and spread over 25 years, it encompassed development of Chabahar through which the Iran-Afghanistan-Central Asia transportation corridor is to be connected to the wider BRI project. It will help in modernising oil and gas sectors, establishment of industrial zones, military and technological cooperation, and supply of Iranian oil to China on cheaper rates. The recent China-Afghanistan-Pakistan tripartite meeting held at Beijing has rekindled the hopes. Deputy PM Ishaq Dar says that China will help develop Peshawar-Kabul Corridor, and it now seems more likely that Afghanistan will join CPEC in its own best interest. Once Afghanistan decides to join it, CPEC can be renamed as China-Pakistan-Afghanistan Economic Corridor (CPAEC). Whatever the name, the essence lies in joining hands for emancipation of the societies of member states and whole of Eurasia, through enhanced economic collaboration. The BRI, Iran-Afghanistan-Central Asia-China Corridor and CPEAC would complement each other multiplying dividends resulting in job creation, poverty alleviation, women empowerment, environmental protection and improved regional peace and stability. About 94% respondents of the survey conducted for the dissertation agreed to the fact that increased interdependence through BRI-CPEC/CPAEC will engender socioeconomic development as well as peace and stability. Hit by foreign military interventions and internal strife, Afghanistan needs a fast paced socioeconomic development. Quickest solution to this predicament lies in transit trade, followed by development of industrial zones along CPAEC to augment Afghanistan's economic progression. Significance of Pakistan as a conduit for trade by Afghanistan and Central Asia is undeniable. Afghanistan is also an essential channel in this connectivity. Its inclusion in BRI/CPEC will multiply benefits for whole of Eurasia. Professor Arshin Adib Moghadam of SOAS opines that addition of Turkey, Iran and India to BRI and CPEC would make it more advantageous. He believes, "India has a Eurasian DNA, its alliance with the west is unnatural, and it will come back one day." India stands to gain immensely for its trade by East-West connectivity through Pakistan; a truck crossing Torkham or Chaman could reach India within 24 hours. This article suggests complementing traditional statecraft with shared economic growth to optimise the potential of the resource-rich region through interdependence. One of the best examples is the formation of European Coal and Steel Community (ECSC) in 1951. It was based on French Foreign Minister Schuman's idea that it would "make war not only unthinkable, but materially impossible". The ECSC really helped preclude conflicts in Europe, and laid the foundation of today's EU. Likewise, CPAEC offers requisite constituents to transform the Pakistan-Afghan relationship into a long-term mutually beneficial partnership. The risks, apprehensions, irritants, opposition and attacks on CEPEC/CPEAC by inimical forces are likely to persist. However, Afghanistan, China and Pakistan must not be deterred by these challenges. Inclusivity of the masses in CPAEC projects is the best security guarantee for it. When bread and butter of employees will come from these, they will secure and defend it against attacks. Collective gains and losses are likely to bring the member states into an enduring bond of mutually beneficial coexistence.
