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  "path": "/middle-east-war-pakistan-inflation",
  "publishedAt": "2026-05-02T09:30:02.000Z",
  "site": "https://nukta.com",
  "textContent": "\n\n\n\nPakistan's inflation could average 9-11% over the next 12 months if the Middle East conflict drags on, according to a new report by Topline Securities. Higher oil prices are the main driver, with fourth-quarter FY26 inflation potentially exceeding 11% under a $100 per barrel oil price assumption. Growth forecasts have also been revised downward.\n\n#### What does Pakistan's inflation forecast look like if the Middle East war continues?\n\nPakistan's inflation is projected to average 9-10% over the next 12 months, rising above 11% in the fourth quarter of FY26, based on oil at $100 per barrel.\n\nIf oil climbs to $120 per barrel, average inflation could reach 10-11%, which may require the State Bank to tighten monetary policy further to protect real interest rates.\n\n\"Every $10 per barrel increase has an impact of 50 basis points on our inflation projections,\" said Shankar Talerja, head of research at Topline Securities.\n\n#### How could higher oil prices affect Pakistan's GDP growth?\n\nHigher energy prices are expected to weigh on economic growth alongside inflation.\n\nTopline revised its GDP growth forecast for FY27 to 2.5-3.0%, down from an earlier estimate of 4.0%, a reduction of 100-120 basis points. For FY26, growth is expected to remain within the range of 3.5-4.0%, broadly in line with revised central bank guidance.\n\n#### What pressure could the conflict put on Pakistan's external accounts?\n\nThe current account deficit for FY27 could stay below $3.5 billion, or 0.8% of GDP, if administrative controls on imports are maintained. Without those controls, the deficit could exceed $8 billion, or 1.9% of GDP, putting direct pressure on foreign exchange reserves.\n\nThe fiscal deficit for FY26 is expected to land between 4.0% and 4.5%, slightly above the IMF's 4.0% target, partly due to government relief spending. A similar range is projected for FY27.\n\nThe Pakistani rupee is expected to depreciate by an average of 5-6% in FY27 under a controlled scenario. Slippages in external balances could, however, lead to sharper depreciation.\n\n#### How are Pakistan's imports, exports and remittances expected to change?\n\nNon-oil imports are projected to reach $48-50 billion in FY26, the second-highest level on record.\n\nTopline notes that non-oil imports have declined only five times in the past 22 years, mainly during periods of strict government controls or global financial stress. In its base case, Topline expects non-oil imports to fall 8% in FY27, against a long-term compound annual growth rate of 5.7%, supported by administrative measures.\n\nOil imports are expected to decline because of a projected 12% drop in petroleum consumption. That decline is offset by an assumed 48% increase in crude and refined petroleum prices, with crude at $100 per barrel and refined products at $130 per barrel.\n\nRemittances are projected to fall 3.5% in FY27, reflecting a 10% decline from Gulf countries and a 3% rise from the rest of the world.\n\nExports are expected to decline 4% in FY27, based on historical trends during comparable periods.\n\nUnder these combined assumptions, the current account deficit is projected at $3.5 billion, or 0.8% of GDP, for FY27.",
  "title": "Middle East war could push Pakistan inflation to 11% and slow growth, Topline warns"
}