|  | 


JS Securities Limited – JS Research (17 -03 -2023)

Karachi, March 17, 2023 (PPI-OT): 15-month low oil prices bring hope for Pak macros

With an average oil price of US$100 per bbl in CY22, Oil prices (Brent) have been hovering in the range of US$75 – US$85 since the past 5 months, with current prices below ~US$75 per bbl; for the first time in 15 months.

Pakistan being a net oil importer is on the favourable end of the ongoing oil price slump. The commodity is a key contributor to the country’s trade balance and inflation, two important data points at the moment.

Assuming an average of US$75 per bbl for remaining FY23 (vis-a-vis US$95 per bbl under our current base case) would take our CAD estimates down from US$7bn to US$5.8bn (1.7% of GDP). Moreover, FY24F CAD estimates may also decline from US$9bn (at US$90 per bbl) to US$5.9bn (at US$75 per bbl). While we expect FY23E/FY24F average CPI to clock in at 29%/16%, respectively, a 15% decline in oil prices for the remainder of FY23, extended to FY24 would reduce our headline inflation estimates by ~40/100bps, respectively.