Can the Newly Discovered Oil Change the fortune of Pakistan’s economy?

There are major problems which have been much focused in the Pakistan economy that consists of inflation, outstanding debts and poor foreign exchange reserves. Nonetheless, recent news of the discovery of large deposits of oil have brought good light to the hope of a possible revival. The question of interest therefore is whether this discovery could perhaps be the magic bullet that would turn around the Pakistan economy and usher the country back to a path of stability and growth.

1. The Discovery: However, surprising as it may sound, flexible working could be a game changer.

Pakistan wanted to change its economy in 2024 and hence disclosed the largest oil discovery ever recorded. It has been announced that discovery of this resource, carried out in the south of the country, can turn the situation in the crisis-stricken Pakistan’s economy (CNBC TV18). The initial findings are that the reserves might be very huge and able to drastically diminish the expatriate/importation of petroleum products which are very expensive today.

Pakistan has been importing oil to fulfill its energy demand for many years and this has become one of the major causes of the trade deficit. According to initial reports, if the new found reserves are as prospective as the preliminary discovery, it will minimize the dependency of Pakistan on foreign oil, and bring a huge relief to its foreign exchange reserves which amounts to acquisition of billions of dollars.

2. Potential for Economic Revival

Its discovery has brought people confidence that there would be an economic turn around. In the view of the experts, if the oil reserves are discovered and developed in an optimum way, Pakistan can become an exporting country of oil and get more revenues and employment in the oil sector. The discovered oil resources may well be an economic savior for the country since it will enhance foreign reserves stability and ease the balance of payment problems in the country (The Business Standard).

Also, the oil sector could generate enough capital that, perhaps, Pakistan requires in the future as it can lure foreign investments. The oilfields of Pakistan are expected to attract the attention of the international oil organizations who will invest in their further exploration to pump more oil and bring in the latest technology and funds in the process. Thus, this flow of FDI could be beneficial for Pakistan mainly in the sectors of infrastructure and technology etc and stabilization of the country’s economy.

3. Challenges Ahead

With the new findings, it has been seen that along with the positive effects, there are a number of issues which accompany the findings. Crude oil processing and production involve the use of hi-tech mechanisms and/or equipment and resources hence it is considered as highly capital intensive. Depending on the credit-terms offered there is little evidence that Pakistan is wholly capable of fully developing these reserves in their current infrastructure. Also, the oil market is very unpredictable and these constant global oil price fluctuations may have an impact on the potential profitability of the reserves.

In addition, there is a dissuaded history of exploration or exploitation of natural resources in Pakistan. Previously there has been inefficiency, embezzlement, and administrative entanglements that have limited the proper harness of the resources within this country. Thus, for Pakistan to derive the total benefits it requires to pay from the oil discovery it will have to introduce reforms aimed at enhancing transparency, accountability and efficient governance effective in the oil sector.

4. Regional and Geopolitical Implications

What has a great impact in the prospect of finding oil in Pakistan is the geopolitical stance which the country and the find itself could bring to the South Asia region. India and China are the major energy consuming countries neighbors to Pakistan and hence this new oil wealth could be used to strengthen its stand in the region.

Further, this innovation may change the balance of power of Pakistan with its conventional suppliers of energy sources. This way, Pakistan could alter the trade relations or centralize less on Saudi Arabia and UAE for importing oil by decreasing its reliance on imported oil (Offshore Technology).

5. Long-Term Economic Impact

Herein, Goran does a splendid job in asserting that the discovery of oil barely has any perpetual potential for the betterment of the economy of Pakistan if only the president and other governmental authorities will not properly manage this powerful material. If well managed the revenues will be able to offset some of the problems facing the country including but not limited to debt, infrastructure and poverty.

But there is also the danger of being enmeshed in the so-called ‘resource curse’ where concentration on natural resources hinders the other sectors performing well and causes fluctuations in the economy. To this end, Pakistan has to come up with ways on how to make its economy more vibrant and drive its growth by embracing technological, agricultural and manufacturing sectors apart from exploring for oil (Outlook Business).

Conclusion

The recent discovery of oil in Pakistan has the prospects of greatly boosting the economy of a country that is currently in an economically delicate state. If developed and managed properly, the reserves could partially save the country from shortage in oil import, attract foreign investors and enhance its balance of payments. Though, factors like; inadequate infrastructures, governance challenges and unstable oil prices are still major impediments.

However, the real significance of this discovery can be traced with the way Pakistan should manage its development strategy. An open and well managed oil sector could be the beginning of the new economic growth. But dependence on oil could also bring about more problems if other segments of the economy are left untreated. It is not the end of Pakistan’s miseries but provides the ray of light in the otherwise harsh reality of the economic situation.

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