Bad news for bankrupt Pakistan as Iran war deepens economic crisis, PM Shehbaz announces major budget cuts due to….

While Pakistan is projecting strength during the ongoing conflict in Iran, its internal situation is becoming increasingly fragile. The country is facing a serious financial crisis, worsened by rising oil prices. During the recent budget, Prime Minister Shehbaz Sharif faced criticism as the government chose to cut development spending instead of reducing other expenses. The development budget was presented as unnecessary spending.

Government Cuts Development Budget

Pakistan’s financial condition has worsened to the point where it has reduced spending on development projects. The ongoing tensions in the Middle East and soaring fuel prices have put heavy pressure on the country’s finances. To manage the situation, the government has reduced this year’s development budget by 10%. Out of 1,000 billion rupees allocated earlier, 100 billion rupees have been cut. The saved money will be used to manage expenses and provide subsidies on fuel to control rising prices.

Oil Supply Pressure in Pakistan

Over the past two weeks, rising global prices of petroleum and lubricants (POL) have increased pressure on Pakistan’s economy. The government has tried to keep petrol and diesel prices stable by giving heavy subsidies.

However, to balance this, prices of high-octane fuel and kerosene have been increased significantly. This has added to the financial burden and highlighted the government’s struggle to manage the crisis.

State of Government Funds

• Contingency Fund: Around 390 billion rupees were set aside for emergency situations in the budget.
• Use of Funds: Part of this money has been spent on building Danish schools, while the remaining is now being used for fuel subsidies.
• Unclear Balance: It is not clear how much money is still left in this emergency fund.

Risk of Supply Disruptions and Lockdown Measures

Apart from inflation, Pakistan is also facing the risk of supply chain disruptions and shortages of essential goods. To deal with this, the government is considering measures like partial lockdowns. To save money and fuel, the country has already reduced the working week to four days, showing the seriousness of the ongoing crisis.