Pakistan cannot afford a war it isn’t fighting

If the first shock is in the markets, the second is always at home. Not immediately. Not dramatically. But inevitably. A few dollars added to the price of oil. A slight firming of global yields. A currency that begins to weaken, not in a crash, but in a slow, familiar slide. For most countries, these are manageable adjustments. For Pakistan, they are something else entirely. They are triggers. Because what unfolds in global markets does not stay there. It travels through prices, through capital flows, through expectations and eventually lands where it hurts the most: the domestic economy. That is the uncomfortable reality Pakistan now faces in the shadow of war in the Middle East. We are not on the battlefield. But we are exposed to every ripple it creates. And exposure, in today’s world, is not a passive condition. It is an active risk. Start with the most obvious trigger: energy. Pakistan imports roughly 70–80 percent of its oil requirements. In FY23 alone, the country’s petroleum import bill hovered around $17–18 billion, even in a relatively stable pricing environment. Now layer onto that a sustained increase in global oil prices, say $10 per barrel, and the math becomes unforgiving. Historically, that translates into an additional $1–1. 5 billion in annual import costs. That is not just a line item. It is pressure on foreign exchange reserves that are already thin. It is downward pressure on the rupee, which amplifies the cost further. It is upward pressure on inflation, particularly through fuel and electricity tariffs. And inflation, in Pakistan, does not remain confined to economics. It spills into politics. Which is why the real issue is not whether oil spikes to $100 tomorrow; it is whether Pakistan can absorb $85–$95 oil for an extended period without slipping back into crisis mode. If we are honest, the answer is still uncertain. Because the country’s economic structure remains highly sensitive to external shocks. Over the past decade, every major episode of global volatility, whether driven by oil, interest rates, or capital flows, has followed a familiar script. Reserves come under pressure. The currency adjusts. Inflation rises. Policy reacts, often late, often under constraint. And then comes stabilisation. .. usually supported by external financing. It is a cycle. And cycles, if not broken, become patterns. So what does breaking this cycle actually require? Not slogans. Not temporary relief measures. But structural shifts, particularly in how Pakistan manages energy, external risk, and economic discipline. The first and most obvious lever is energy itself. Pakistan has spent decades debating its energy mix, but the direction of travel has been inconsistent. Imported fuels still dominate, even though the country sits on one of the most underutilised renewable profiles in the region. The wind corridor in Sindh alone, stretching from Gharo to Keti Bandar, has an estimated potential exceeding 50, 000 MW. Solar irradiation levels across Balochistan, southern Punjab, and interior Sindh rank among the highest in Asia, with average yields of 5–7 kWh per square metre per day. And yet, as of today, renewables (excluding large hydro) account for barely 5–6 percent of Pakistan’s total energy mix. That is not a technical limitation. It is a policy choice. Every additional gigawatt of wind or solar capacity reduces dependence on imported fuel. Every shift toward indigenous energy reduces exposure to global price shocks, shipping disruptions, and currency volatility. This is not about climate targets. It is about economic survival. The second lever is buffering external shocks. Most countries exposed to energy volatility maintain some form of strategic petroleum reserves. Pakistan’s capacity remains limited, estimated at covering only a few weeks of consumption at best, and often less in operational terms. Even a modest expansion of these reserves, targeting 30 to 45 days of cover, could provide critical breathing space during periods of market stress. It does not eliminate exposure. But it buys time. And in crisis management, time is often the most valuable asset. Then comes a more sensitive, but increasingly relevant question: currency. For decades, Pakistan’s external trade, particularly energy imports, has been overwhelmingly dollar-denominated. This creates a structural dependency, where any strengthening of the dollar directly feeds into domestic inflation and external account pressure. Diversifying trade settlement mechanisms, even partially, could reduce this vulnerability. This does not mean abandoning the dollar. It means reducing absolute reliance. China, for instance, now settles a growing share of its energy trade in yuan. Bilateral arrangements between emerging economies are slowly expanding. Pakistan, given its trade relationships, has room to explore similar mechanisms. Even marginal shifts can ease pressure on the dollar balance. And in a constrained external account, marginal relief matters. Then there is Gwadar. For years, it has been discussed as a symbol of potential. A strategic asset. A cornerstone of regional connectivity. But in practical terms, its role remains underdeveloped. In a world increasingly shaped by chokepoint risk, where a narrow passage like the Strait of Hormuz can influence global markets, Gwadar’s value lies in something simpler. Optionality. It does not replace existing routes. It complements them. It provides redundancy in a system where single-point failures are becoming more dangerous. Operationalising Gwadar, not as a concept, but as a functioning logistics, energy, and trade hub could incrementally reduce Pakistan’s exposure to external disruptions. And again, incremental resilience is still resilience. But perhaps the most difficult reform lies not in infrastructure or energy. It lies in discipline. Because ultimately, Pakistan’s vulnerability is not just external. It is internal. Global financial conditions are tightening. With US interest rates elevated and bond yields firm, capital is no longer cheap. It is selective, cautious, and quick to exit economies that lack credibility. Pakistan has felt this repeatedly. Each external shock exposes the same structural weaknesses, fiscal imbalances, policy inconsistency, and an export base that has struggled to scale meaningfully. Breaking this pattern requires more than periodic adjustments. It requires credibility. Fiscal consolidation cannot be episodic, it must be sustained. Monetary policy cannot be reactive, it must be anchored. Export growth cannot be aspirational, it must be executed. Because resilience is not built in the moment of crisis. It is built in the years before it. What makes the current global environment particularly unforgiving is that shocks are no longer isolated. Oil prices influence inflation. Inflation influences interest rates. Interest rates influence capital flows. Capital flows influence exchange rates. And exchange rates, in Pakistan, influence everything else. It is a chain. And Pakistan sits at the vulnerable end of it. Which brings us back to the central point. Pakistan is not fighting the conflict unfolding in the Middle East. It does not control the decisions driving escalation. It does not shape the strategic calculations of major powers. But it may have to pay the price of misalignment. Through higher imports. Through a weaker currency. Through tighter financial conditions. That is the nature of modern economic conflict. You do not have to be on the battlefield to feel the war. But you do have to prepare for it. Because in the world we are entering, economic exposure is not a technical detail. It is a strategic vulnerability. And if left unaddressed; it becomes destiny. Copyright Business Recorder, 2026

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