Economic experts have voiced concerns over the dramatic escalation of cross-border tension between Pakistan and Iran, projecting a new wave of inflation in the country if tensions persist.
“Pakistan-Iran tensions simmering from a recent cross-fire incident threaten crucial trade flows, jeopardising domestic stability,” said Intermarket Securities in a note on Thursday.
The brokerage house shared that Iranian LPG, which accounts for 17% of Pakistan’s local demand, faces potential disruption, risking gas price hikes and amplifying inflation woes.
Tensions with Iran add to Pakistan’s economic challenges
“Fruits and vegetables imported from Iran hold a smaller import share i.e. less than 1% market share, (but) they could potentially contribute to food inflation.”
The brokerage house was of the view that the issues could be addressed by regional diversification through Afghanistan. “But it is complicated by Afghan tensions amid deportation of Afghan refugees, limiting alternative sourcing,” it added.
Meanwhile, Samiullah Tariq, Head of Research at Pak Kuwait Investment Company, told media that the impact would not be much as the two countries didn’t have much formal trade.
“Some food commodities like onion, dates might see some impact,” he said.
Similar views were expressed by Mustafa Pasha, Chief Investment Officer at Lakson Investments.
“Pakistan barely has any exports to Iran, while our imports comprise mostly gas and electricity and that too, primarily in the Balochistan province. So supply of electricity/fuel in those regions may be compromised if the recent events lead to border closure,” he told media.
“Overall the impact will be more on sentiment and may affect foreign interest in our capital markets and FDI (foreign direct investment),” he added.
Meanwhile, Pakistan’s Commerce Ministry on Thursday said it is closely monitoring the situation with Iran and in this regard a meeting with trade officials of Pakistan embassy has been lined up to strategise the future course of action.