Pakistan braces for prolonged global energy crisis amid rising fuel costs, loan repayments

Pakistan is preparing for a prolonged global energy crisis, Finance Minister Muhammad Aurangzeb told parliament on Tuesday, warning that even after a ceasefire, damaged energy infrastructure in the Gulf could delay normalisation by weeks or months.

The minister said the government is closely tracking rising petroleum prices, freight and insurance costs, and crude transport disruptions. To mitigate domestic impact, Pakistan has disbursed Rs129 billion in petroleum subsidies and provided support for two-wheelers, four-wheelers, and public transport.

Aurangzeb highlighted that several regional countries have started rationing fuels, noting the UAE has increased petrol and diesel prices by 30% and 70%, respectively.

While remittances to Pakistan have remained stable so far, the minister cautioned that 40-50% of inflows come from GCC nations. Authorities are assessing the potential effects on the current account, balance of payments, and inflation.

The minister also stressed the need for continued International Monetary Fund support under the Extended Fund Facility (EFF), noting that Pakistan entered the crisis with a relatively strong external and internal buffer but requires backstop funding to manage obligations.

Pakistan is scheduled to repay a $3.5 billion loan to the United Arab Emirates this month, alongside $1.3 billion in Eurobond payments due in June, Aurangzeb said, signalling the government’s focus on maintaining financial stability amid global energy uncertainties.