News
World Bank Warns High Energy and Freight Costs Will Keep Pressure on Pakistan
By Mariam Khan
Real Estate Analyst
3 min read
The World Bank's October economic update says Pakistan has remained comparatively resilient to the Hormuz energy shock, but higher energy, freight, food and insurance costs continue to put pressure on inflation and the external balance. It expects energy prices to remain elevated during the rest of 2026.
Why "Comparatively Resilient" Is Not the Same as Unaffected
The World Bank describes Pakistan as resilient relative to others, while the same update lists costs that are still weighing on inflation and the external balance. Both statements are in the report as relayed to us. The reports do not give the Bank's growth or inflation forecasts, so we cannot say how large the pressure is expected to be.
Why the Cost List Includes Freight and Insurance
The Bank names energy, freight, food and insurance. Freight and insurance are shipping costs, which relate directly to the disruption around the Strait of Hormuz that we have followed in our coverage of constrained Hormuz shipping and the effect of oil at $106 on construction risk. Imported inputs become more expensive when freight and insurance rise, which matters for a country that imports fuel.
Why Elevated Energy Prices Reach Construction
An expectation that energy prices stay elevated for the rest of 2026 keeps fuel and power costs in play for the sector. We saw this in the latest fuel price revision, where diesel remained close to Rs400 per litre, and in the DISCOs' request for a further fuel cost adjustment. Cement, steel, bricks and transport all use energy, so persistent costs could make new housing and infrastructure projects more expensive. That is a risk and not a measured effect, and the report as relayed gives no figures for construction costs.
Why the Inflation Picture Is Mixed
Inflation has eased recently, as in our report on September inflation of 10.3 percent. The World Bank's warning is about pressure continuing, not about a new spike, so the two are not in conflict. Readers should treat the update as a caution about the direction of costs.
What This Means for Developers, Buyers and Investors
Developers and contractors should keep fuel and freight volatility in their project contingencies and watch input prices over several months, not single days. Buyers of off-plan property could see developers pass on higher costs. Investors should watch the next fuel price revisions, import cost data and any revisions to the Bank's outlook. The update is published by the World Bank.