Work from home, school closures: Pakistan enacts sweeping austerity measures as oil prices surge
The closure of the Strait of Hormuz amid the US-Iran war has disrupted global oil shipments and driven fuel prices sharply higher.
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ISLAMABAD: Pakistan has announced sweeping measures to help ease a looming energy crunch, as rising oil prices and the closure of the Strait of Hormuz threaten to trigger a severe crisis.
Schools across the country will close and universities shift to online classes for the next two weeks. Office workers have also been instructed to work from home to reduce fuel consumption.
Fuel allowances for government vehicles will be halved over the next two months, while Cabinet members, advisers and special assistants will voluntarily forgo their salaries for the same period.
Parliamentarians will face a 25 per cent pay cut, and overall government spending will be reduced by 20 per cent.
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The measures follow Iran’s blockade of the Strait of Hormuz after US-Israeli strikes on Feb 28.
The strategic waterway handles about one-fifth of global crude flows, and its closure has disrupted global oil shipments and driven fuel prices sharply higher.
Last week, Pakistan’s government sparked public anger by raising fuel prices by about US$0.20 per litre in one of the largest increases on record.
LONG QUEUES AT PETROL STATIONS
Pakistan’s energy sector relies heavily on imported oil and liquefied natural gas (LNG). With the Iran-US-Israel conflict squeezing supplies, petroleum dealers warn the situation could get worse.
"If the crisis continues, the government will have to source supplies through alternative routes which will incur higher costs,” noted Noman Ali Butt, vice chairman of the All Pakistan Petrol Pump Owners Association.
“Insurance companies covering these shipments will also charge higher rates. For instance, if they normally charge 0.5 per cent, they may charge 3 to 4 per cent (now),” he added.
The uncertainty has already triggered panic buying, with long queues forming at petrol stations across the country.
“If prices keep rising like this, how will people manage?” said Pakistani citizen Patras Maseeh, who spoke to CNA while waiting to pump petrol.
“Businesses will struggle, transport fares will go up and daily life will become harder. Many are already struggling to make ends meet.”
Analysts warn that the fuel price hike will ripple through the broader economy, pushing inflation higher.
With roughly 40 per cent of the population living below the poverty line, lower-income households are expected to bear the brunt of the crisis. Key sectors such as agriculture and construction are also at risk.
“MAJOR SHOCK”
Export industries remain particularly vulnerable, while energy-dependent sectors such as manufacturing are also feeling the strain as Pakistan grapples with mounting economic pressure.
Economists say the government’s measures are necessary to prevent a full-blown energy emergency.
Ali Salman, CEO of the Policy Research Institute and Market Economy, described the war as a “major shock for Pakistan’s economy”.
“If the prices double from where they are now, it will affect two things - the inflation on households … cost for goods and services will increase. It will also affect government revenue,” he said.
The Middle East crisis is also hitting Pakistan’s textile sector, a backbone of the country’s export revenue.
One company that has been affected is Monarchy. The fashion brand’s CEO Ali Qureshi said more than 70 per cent of its sales are made online.
Online sales from Gulf countries have plunged significantly, while airport closures have disrupted travel and business, he added.
“There is a big chunk of clients I have, who are sitting in Dubai, Qatar, Oman, Saudi Arabia … When they come to Pakistan, they buy from us,” he noted.
But that customer channel has effectively been cut off, he said. "The flights are closed and they are not able to come."
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