Pakistan’s government has implemented fuel-saving measures after oil surged above $100 and gas output from the Middle East was disrupted, triggering panic buying in the import-reliant South Asian nation.
Prime Minister Shehbaz Sharif announced more than one dozen austerity measures on Monday to deal with the current global fuel crisis triggered by the conflict in the Middle East. Steps include reducing workforce by half along with moving to a four-day week. For the next two months, government expenditure will be reduced by 20% and fuel allocated to vehicles of government departments will be reduced by half.
“The regional situation and war has affected our hard-gained economic stability but the government is making every effort to prevent burdening the common man,” Sharif said in an address to the nation.
The measures comes after the government on Saturday hiked the cost of fuel by 55 rupees (20 cents), the country’s highest ever increase, with Petroleum Minister Ali Pervaiz Malik warning that prices could be adjusted on a weekly basis. There was brief panic buying at pump stations on Friday and at least one death after the government signaled that prices would rise.
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West Texas Intermediate is now trading near $95 a barrel after earlier surging as much as 31%. Higher global oil prices could lead to additional increases in domestic fuel rates, a move that would likely feed into inflation and weigh on the rupee, which is sensitive to energy costs.
Among other measures, schools will remain closed for two weeks from next week while universities will shift to online classes. Cabinet members will not draw a salary for next two months and a ban has been imposed on unnecessary official foreign tours. Seminars and conferences will also be held in government buildings instead of hotels.
Muhammad Awais Ashraf, the director of research at AKD Securities, said rising fuel prices could see inflation accelerate from 7% to around 9.25% in the April-June quarter. He said it was important to raise prices “as soon as they increase on the international market” to prevent petrol pumps from hoarding.
Sana Tawfik, head of research at brokerage Arif Habib, added that by keeping domestic fuel prices elevated “the authorities are attempting to manage demand and protect fuel stocks.”
During the last energy crunch four years ago, Pakistan suffered daily blackouts and energy-saving measures that curbed economic growth. Sharif’s government has sought to stabilize the economy in recent years, helped by financial support from the International Monetary Fund. The government had projected 4.2% growth for the fiscal year that began in July 2025.
Investors fear that “rising oil prices will affect the economic stability achieved in last few years,” says Mohammed Sohail, chief executive officer of Topline Securities.
Pakistan’s central bank kept its key interest rate unchanged on Monday, citing economic uncertainty.
The government last week said the country, heavily dependent on energy imports from the Gulf, had enough stock of petroleum products to meet national requirements for around four weeks. But the country’s largest gas distributor has already announced a cut in supplies to some of its industrial customers. Sui Northern Gas Pipelines Ltd. in a notice to customers last week said it could not provide regasified LNG to fertilizer plants having been notified of disruptions from its own supplier, Pakistan State Oil.