Report warns of up to 11% inflation in Pakistan:Iran war can reduce PKR’s value to 298 against dollar

The ongoing tension in West Asia and the growing oil crisis are set to increase pressure on Pakistan’s economy. If crude oil prices continue to rise in the international market, Pakistan’s inflation rate could once again cross double digits and reach up to 11%. Additionally, the value of the Pakistani rupee against the dollar could drop to 298. This information has been provided in the Pakistan Strategy Report by Dawn and Topline Securities Limited. If crude oil remains above $120 per barrel, inflation will increase According to the report, under current circumstances, inflation could remain between 9 to 10% on average for the next year. It is estimated to go above 11% in the fourth quarter of fiscal year 2026. If crude oil prices remain at $100 per barrel, inflation will increase, and every $10 surge in oil will raise inflation by 50 basis points. If oil remains above $120 per barrel, annual inflation could go up to 11%, which would force the State Bank of Pakistan to increase interest rates. Pakistan’s GDP Growth Forecast Also Cut Due to Inflation Pakistan’s economic growth pace is expected to slow down due to rising inflation. The report has reduced the GDP growth forecast for fiscal year 2027 from 4.0% to 2.5-3.0%. For fiscal year 2026, growth is likely to remain at 3.5-4.0%. The industrial sector could be hit the hardest, where growth may fall from 4% to just 1%. Pakistan’s CAD May Cross $8 Billion in Fiscal Year 2027 The report warns that if the government does not control imports, Pakistan’s Current Account Deficit (CAD) could cross $8 billion (approximately PKR 2,22,400 crore) in fiscal year 2027. This will further increase pressure on foreign exchange reserves. Meanwhile, the fiscal deficit in FY 2026 is estimated to be 4.0 to 4.5% of GDP, which is significantly higher than the targets set by the International Monetary Fund (IMF). Pakistani market becomes the world’s worst performing market Pakistan Stock Exchange (PSX) has been one of the worst performing markets in the world. The main reason for this is heavy dependence on imports for energy. Pakistan imports 85% of its energy requirements. Petroleum imports in FY 2026 are estimated to reach $15 billion. Due to this, the market witnessed a 15% decline in the first quarter of the year. Exports and funds coming from abroad also expected to decline Pakistan’s economic future may see a 3.5% decline in remittances (money coming from abroad). Money coming from Gulf countries (GCC) may decline by 10%. Also, exports are estimated to decline by 4%. The Pakistani Rupee (PKR) may also weaken against the dollar, reaching a level of 298 by fiscal year 2027. ​