ICMAP calls for 90-day oil buffer, Sharia hedging to avert economic shocks
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This picture shows a general view of the seaport in Karachi. — AFP/File
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KARACHI: Pakistan’s Institute of Cost and Management Accountants (ICMAP) on Friday recommended increasing Pakistan’s strategic petroleum reserves for at least 90 days for at least 90 days of national demand, and at the same time, Israeli -Iran conflict to deal with oil prices.
The ICMAP has issued a policy -based diagnosis, which supports the government’s recent move to form a high -level committee headed by the Finance Minister, which can review the growing economic risks. This high -level task force will be responsible for overseeing global developments and protecting Pakistan’s economic stability in a timely manner, to integrate the response to the cross -institutional policy.
The diagnosis has been identified that although conflict is geographically limited, its indirect economic results are already spreading in global markets, especially affecting energy, trade and financial systems.
For Pakistan, its exhibition is important due to its imported fuel, the main paths of maritime trade through the Gulf, and the livelihood of more than four million migrants living in the Middle East.
The CMAP said in a statement, “The theme of the analysis is a warning that some kind of barrier in the Strait of Hormuz – through which about 20 percent of global oil and LNG transit – can reach oil prices to $ 100 and $ 130 a barrel.”
It added, “This will increase Pakistan’s energy import bills substantially, raise electricity generation costs and increase inflation. Domestic diesel prices may increase by more than 30 %, which can have a widespread impact on food production, transport and domestic spending.”
The report further highlights the increasing risk of financial stability. The deportation of Pakistani rupee, increasing external debt service costs, and potential fuel subsidies can eliminate financial flexibility with subsidies. Exporters are already facing a rapid increase in shipping insurance premiums, allegedly climbing $ 400 to $ 2,000 per container, thus reducing export competition. In addition, the supply chain is expected to affect industrial production by obstacles and high charges of freight – especially key sectors such as textile, chemicals and edible oils.
The Institute has recommended increasing Pakistan’s strategic petroleum reserves for national demand for at least 90 days for the current 21 days. This critical buffer can be financed through autonomous coins, which has been modeled after successful international ways, to increase energy safety and reduce the risk of global supply shock.
Additional recommendations include adoption of oil prices hedging equipment for 30 % imports to manage international prices fluctuations. The ICMAP also supports the diversification of oil purchases through local currency trade agreements with countries like Russia, Iran and China. Local oil refineries have also been advised to accelerate the refinement, which can reduce the dependence on better fuel imported and potentially save $ 1 billion annually. The ICMAP recommends changing recent taxes on solar panel imports and promoting clean energy and increasing long -term energy flexibility.
On the external front, it emphasizes the need to protect the Gulf countries, encourage formal remittance channels, and to protect remittances overseas by helping workers returning to maintain domestic income and foreign exchange.
The ICMAP further suggests that the IMF’s flexibility and sustainable trust (RST) apply for financial support and set up the Energy Shock Stabilization Fund in collaboration with multilateral development partners to strengthen financial buffers.
The ICMAP has warned that although the Israeli-Iran conflict is militarily, its wider economic implications-especially by the rise in oil prices, trade barriers, inflation, and insurance costs, are significantly affected by Pakistan’s economic outlook. The Institute emphasizes that only an active, integrated and future -looking policy response can only ensure economic stability and preparation at these uncertain times.
