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Business Recorder
21-06-2025
- Business
- Business Recorder
Potential fallout of Israel-Iran conflict: ICMAP for ensuring 90-day strategic oil reserves
KARACHI: To address the challenges arising from escalating regional tensions, the Institute of Cost and Management Accountants of Pakistan (ICMAP) has proposed a set of strategic policy recommendations. These include the establishment of 90-day strategic oil reserves, formation of an economic task force, and adoption of oil price hedging mechanisms to help shield Pakistan from the potential fallout of the Israel-Iran conflict. 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
Business Recorder
09-05-2025
- Business
- Business Recorder
ICMAP proposes four-pillar crypto adoption framework and CBDC launch plan
KARACHI: The Institute of Cost and Management Accountants of Pakistan (ICMAP), through its Research and Publications Department, has unveiled a comprehensive policy proposal titled 'ICMA Proposes Crypto Adoption Framework and CBDC Launch Plan to Government.' This timely initiative introduces a Four-Pillar Framework for the responsible adoption of crypto currencies in Pakistan and outlines a strategic Central Bank Digital Currency (CBDC) Development and Regulatory Launch Plan. The proposal is intended for consideration by the Pakistan Crypto Council (PCC) and relevant policymakers, aiming to facilitate a secure and well-regulated digital financial ecosystem in the country. In view of the rapidly evolving global landscape of digital finance and crypto investments, ICMAP's proposal serves as a much-needed foundation for Pakistan's policy direction. The Four-Pillar Framework focuses on key dimensions necessary for crypto integration, each supported by international case studies to guide implementation. The first pillar emphasizes the creation of a clear regulatory framework. It highlights the need for robust, transparent, and internationally aligned regulations to support the development of a safe crypto environment. This includes full compliance with Anti-Money Laundering (AML) and Counter-Terrorism Financing (CFT) measures, as well as lessons from other jurisdictions that have effectively implemented such frameworks. The second pillar advocates for alignment with global crypto and blockchain standards. ICMAP stresses that Pakistan must actively engage with international standard-setting bodies and adopt best practices to ensure credibility and innovation. This involves the appropriate classification of digital assets, setting up effective controls for digital asset transactions, and encouraging blockchain innovation. The case study provided shows how a country successfully built a compliant yet dynamic crypto ecosystem by closely working with global organizations. The third pillar calls for active industry-government collaboration to encourage responsible innovation while maintaining financial stability. ICMAP highlights that close coordination between regulators and industry stakeholders is essential to strike a balance between enabling innovation and safeguarding the economy. The included case study illustrates how a country effectively fostered such cooperation, promoting growth while ensuring regulatory oversight. The fourth and final pillar underlines the importance of consumer protection and financial stability. ICMAP recommends clear and enforceable measures to ensure that consumers are protected from abuse and that markets operate with integrity. A case study demonstrates how another country implemented robust consumer safeguards in the crypto sector, ensuring both user confidence and market stability. Complementing the crypto framework, ICMAP has proposed a structured Central Bank Digital Currency (CBDC) Development and Regulatory Launch Plan. Recognizing the need for a state-backed digital alternative to crypto currencies, this plan recommends that the State Bank of Pakistan introduce a CBDC to enhance regulatory control, reduce volatility, and expand financial inclusion. A government-issued CBDC would provide a stable digital option that supports innovation without compromising monetary sovereignty. The proposal also reflects on global investment trends, noting that crypto currencies have attracted investors due to their higher returns compared to traditional stock markets and real interest rates. As more countries increase their exposure to digital assets, ICMAP believes Pakistan must take strategic steps to prepare for the financial future. The document also provides valuable insights into global developments in CBDC implementation, drawing lessons from countries at the forefront of digital currency adoption. Through this initiative, ICMAP reaffirms its role as a leading policy advisor and thought leader in Pakistan's financial landscape. The Institute remains committed to supporting policymakers in developing forward-looking, well-regulated frameworks that enable innovation, protect consumers, and preserve economic stability. Copyright Business Recorder, 2025
