Middle East Crisis and Afghanistan War Strain Pakistan’s Economy, Limited Relief Expected

New Delhi

Pakistan’s fragile economy is facing increasing pressure due to the ongoing crisis in the Middle East and continued security challenges along its borders. The conflict between Iran and the alliance of Israel and the United States has created regional instability that is significantly impacting Pakistan.

The crisis comes at a time when Pakistan is already struggling with economic weakness. Ongoing tensions with Afghanistan, along with persistent attacks and clashes involving militant groups such as Tehrik-e-Taliban Pakistan (TTP) and Balochistan Liberation Army (BLA), have further worsened the country’s financial and security situation.

Officials say these conflicts are affecting Pakistan not only on the military front but also severely straining its economy. With financial pressures mounting, the government in Islamabad has introduced several austerity measures to protect its already fragile economic structure.

As part of the cost-cutting measures, the government has decided to keep up to 60 percent of official vehicles used by central and provincial departments off the roads. Government officials in Grade-20 who earn more than 300,000 Pakistani rupees per month have been asked to voluntarily give up two days of their salary, although the directive does not apply to employees in the health and education sectors.

The government has also ordered a 25 percent reduction in salaries and allowances for members of the national and provincial assemblies for two months. Another major step includes cutting the petroleum allocation for government vehicles by 50 percent.

Cabinet ministers, ministers of state, special assistants and advisers to the prime minister will not receive their full salaries for two months. Additionally, non-essential expenditures across federal and provincial departments will be reduced by 20 percent.

Authorities have also introduced strict travel restrictions. Officials will no longer be allowed to travel in business class. During foreign trips, all government representatives must travel only in economy class. Ministers, lawmakers and officials will be permitted to undertake only essential international visits.

The government has imposed a complete ban on the purchase of new durable items for government offices, while limited procurement of IT equipment will be allowed only after strict review. Meetings in government departments will now be conducted virtually to reduce travel and accommodation expenses.

The ban on purchasing new government vehicles will remain in effect until June 2026. In addition, except for banking services and other essential sectors, government offices will operate only four days a week.

Government seminars, training programs and conferences will also require prior scrutiny and approval before being organized. Authorities have advised the private sector to adopt similar austerity measures, although compliance is not mandatory.

Analysts monitoring Pakistan’s economic situation say the country is already deeply burdened with debt. If the Middle East crisis continues for a prolonged period, the current spending cuts may not be sufficient to stabilize the economy.

Experts warn that an extended regional conflict could further weaken Pakistan’s financial stability and potentially push the economy toward deeper crisis. Normally, business activity increases during the Eid season, but current conditions have slowed retail activity significantly.

Consumers are now focusing only on essential purchases rather than spending as they usually do during this period. Many Pakistanis have also questioned the government’s decision on March 6 to increase fuel prices by 20 percent, a move initially aimed at preventing fuel hoarding.

The decision has instead placed additional pressure on ordinary citizens. Higher fuel prices have also affected the agricultural sector, which contributes about 23 percent of the country’s economy. Transportation costs have surged, making taxi and rickshaw travel significantly more expensive, while food delivery workers have also been hit hard by the price rise.

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