Page 39 - CMA Journal (Mar-Apr 2026)

3) In ationary Forces and Reversal of Disin ationary Moreover, another weakness is the external debt of
Gains: The direct effect of the geopolitical shock, the Pakistan, which stands at $130.8 billion (as of the end of
most tangible and immediate, has been the re- 2023) (World Bank, 2025). A combination of an
emerging in ationary pressures. After the Russia- expanding current account de cit, increased interest
Ukraine war, Pakistan had plunged into an agonizing payments on dollar-related debt as a result of a stronger
in ation crisis, reaching its peak at CPI of 38% in May U.S. dollar, and less scal room provide a fragile external
2023 and then back to 2.4% in January 2025 and, nally, nancing condition. The IMF's timely $6 billion loan
to 5.8% in January 2026 (Dawn, 2026; Pasha, 2026). By package granted in April 2026 offers a limited liquidity
February 2026, when the Strait of Hormuz was virtually buffer, yet it is subjected to extensive conditionality,
shut down, however, in ation had increased to 7.0% which involves keeping a primary scal surplus and
and by March 2026, it was rising more rapidly at 7.3% expanding the tax base (News of Bahrain, 2026).
year-on-year (PBS, 2026).
Policy Recommendations and Strategy towards
The causes of this new burst of in ation are clear and can Resilience
be directly linked to the con ict. According to the PBS
data, the increase in motor fuel prices by 18.01 per cent The US-Iran war in 2026 is an eye-opener to how much
on a monthly basis in March 2026 had been preceded by Pakistan is vulnerable to geopolitical shocks of the outside
rise in electricity charges by 5.08 per cent, with the world. To the community of cost and management
overall effect trickling down to transport-based services accountants (CMA) as well as nancial professionals a
(up 9.15 per cent) and food commodity prices, with number of strategic imperatives emerge:
wheat and wheat our registering an annual increase of 1) Institutionalizing Currency Risk Management: Companies
34%. PIDE has forecasted that during an extreme oil should go beyond reactive hedging and move towards
shock, the headline in ation in Pakistan would rise to comprehensive enterprise risk management (ERM) systems
15-17% (Qadir, 2026). formally grounded in geopolitical scenario analysis. This
involves the application of forward contracts, currency options,
Not only does this in ationary resurgence weaken
household purchasing power (disproportionately and natural hedging mechanisms (such as matching foreign
affecting low-income and middle-income groupings, currency revenues and liabilities) to reduce exposure to
exchange rate uctuations.
who are forced to spend more of their budgets on food
and energy), but also risks the loss of macroeconomic 2) Accelerating the Energy Transition: The high price of
stability won over years under the IMF programme. imported fuel underlines the strategic and economic
Increased in ation would require a more restrictive importance of diversifying the Pakistan energy mix.
monetary policy stance, which would, in turn, Indigenous renewable energy sources such as solar, wind
undermine growth opportunities in terms of private and hydropower are not only bene cial in lowering the
investment and economic growth. import bill and current account, but also help in cushioning
the economy against future changes in the oil prices. The
4) External Sector and Remittance Risks: Although initial government should provide incentives to corporations to
signs showed that remittance in ows from the Gulf
invest in renewable energy through accelerated depreciation
have been surprisingly resilient with the March 2026
allowances and tax credits.
in ows reaching $3.83 billion, the highest gure of the
scal year so far (Dawn, 2026), the medium-term 3) Enhancing Remittance Formalization and Diversi cation:
prediction is still unclear. The Middle East, especially Remittances have shown impressive resilience; however,
Saudi Arabia and the UAE, is the source of about 54 policymakers need to further focus on formalizing in ows by
percent of the total remittances in Pakistan (Dawn, having formal channels of banking transfers and avoid over-
2026). A drawn-out war may disrupt the economic dependence on a particular geographic region. An
expansion to European and emerging labour markets, as
activity in the Gulf, as Pakistani expatriates lose their
planned by the government in their URAAN Pakistan plan is a
jobs and it is possible that workers might be sent back to
wise long-term move.
their countries. According to a study conducted by the
Bureau of Emigration, only in the rst half of 2025, an 4) Deepening the Domestic Debt Market: To lessen undue
excess of 336,000 Pakistanis immigrated to seek foreign dependence on external commercial borrowing and high-
employment, and should such a trend reverse, it would priced Eurobonds, the internal debt market needs to be
additionally burden the domestic labour market and made more profound and liquid. This would be a stable
foreign exchange allocation (CASS, 2025). source of non-in ationary nancing to the government
and a lower exposure to exchange rate risk.

ICMA’s Chartered Management Accountant, Mar-Apr 2026 37