Key Takeaways
- The Economic Affairs Division warns that a renewed conflict between the US and Iran could harm Pakistan's economy.
- Parliamentary committee advises evaluating cost-effective options for the Lyari Elevated Freight Corridor project.
- Committee expresses concern over delays and funding shortfalls in the Karachi Greater Water Supply Project.
The Economic Affairs Division (EAD) has warned of potential economic risks to Pakistan should a renewed conflict erupt between the United States and Iran, highlighting concerns about higher energy costs, inflation, and increased external financing needs. This warning came during a meeting with the National Assembly Standing Committee on Economic Affairs Division.
During the session, chaired by Mirza Ikhtiar Baig, the EAD team, including parliamentary secretary Zeb Jaffar and federal secretary Humair Karim, informed members that Pakistan entered 2026 with improving macroeconomic fundamentals. However, they noted that regional uncertainties persist due to ongoing tensions in the Middle East.
Specifically, the EAD flagged the temporary closure of the Strait of Hormuz as a significant disruption to global energy markets, leading to higher oil prices and supply chain disruptions. While international oil prices have moderated following a ceasefire and the Islamabad Memorandum of Understanding, regional uncertainties remain a cause for concern.
The committee also expressed reservations about the estimated cost of the Lyari Elevated Freight Corridor (LEFC) project under proposed financing arrangements with the Korean Exim Bank. The committee observed that the proposed financing would result in a project cost nearly twice that estimated by the National Highway Authority, emphasizing the need to identify the most cost-effective financing option.
In its recommendations, the committee urged the EAD secretary to convene consultations with relevant ministries and agencies to develop a mutually agreed and financially prudent financing model for the LEFC. The committee also highlighted concerns over delays in the Karachi Greater Water Supply Project (K-IV), noting that only Rs10 billion had been allocated against an estimated requirement of Rs78 billion.
Committee members observed that the significant funding gap could adversely affect the timely completion of the project and delay the provision of adequate water supply to Karachi. They recommended that the Ministry of Water Resources and the project director for K-IV present a comprehensive briefing at their next meeting, covering the project’s status, financial requirements, timeline, and measures being taken to address existing constraints.
The committee was also informed about progress on Tranche-III of the Central Asia Regional Economic Cooperation (Carec) project. The National Highway Authority had awarded the contract for this project, with completion targeted by December 2027.
