Pakistan's trade gap with Gulf partners narrows

Pakistan's trade deficit with Gulf partner countries shrank by 26.35 per cent to $2.85 billion in the first quarter of 2026-27, compared to $3.87 billion a year earlier. The decline was primarily driven by reduced imports and modestly higher exports. The most significant reductions were observed in import payments to Kuwait and Qatar, with import payments to Kuwait falling by 97.46 percent and to Qatar by 72.51 percent.

These two nations accounted for a substantial portion of the overall import payment decrease. The UAE emerged as the leading exporter to Pakistan, contributing approximately 66.21 percent of Pakistan's total exports to the seven Gulf countries in the first quarter of 2026-27, followed by Saudi Arabia at 19.45 percent. The remaining five countries collectively accounted for just 14.34 percent.

The Middle East conflict since March has disrupted Pakistan's trade, leading to a surge in imports from the Gulf while exports are shrinking. This has increased Pakistan's external vulnerability and dependence on Gulf energy and raw materials. Lower imports and higher exports helped reduce the trade gap by 26 percent to $2.85 billion in July-September.

September marked the sixth month after the March contraction, suggesting Pakistan's import flows are highly sensitive to geopolitical developments, especially in energy corridors. Pakistan remains heavily reliant on energy imports, particularly from the UAE and Saudi Arabia, which together account for 90 percent. Other countries, including Qatar, Kuwait, Oman, Jordan, and Bahrain, play secondary roles despite their export capacities.

Pakistan's exports to the Middle East increased by 10.96 percent to $864.878 million in the first quarter of 2026-27, up from $779.425 million in the same period last year. However, imports from the region fell by 20.02 percent to $3.717 billion in the first quarter of 2026-27, down from $4.648 billion a year earlier. In comparison to the previous year, FY26 exports to the region fell by over 2 percent to $3.093 billion from $3.152 billion, while imports from the region decreased by 20.02 percent to $3.717 billion in 1QFY27, compared to $4.648 billion in the previous year.

Country-wide data revealed that exports to Saudi Arabia grew by 4.92 percent in 1QFY27, while imports decreased by 18.52 percent, indicating a decline in Pakistan's imports of Saudi goods, especially oil. Exports to the UAE saw a positive trend, increasing by 16.35 percent in 3MFY27, driven by gains in Abu Dhabi, Ajman, and Fujairah.

Imports from the UAE fell by 6.15 percent, mainly due to lower petroleum and commodity inflows. Exports to Qatar dropped by nearly 22.79 percent, while imports plummeted by 72.51 percent year-on-year. The decline in imports reflects a significant shift in energy-related purchases from the region. Exports to Kuwait decreased by 2.24 percent, but imports fell by 97.46 percent in 1QFY27, highlighting Pakistan's reliance on Kuwaiti imports, particularly petroleum, compared to a year ago.

Exports to Bahrain contracted by 23.07 percent, while imports declined by 17.31 percent in 1QFY27. Exports to Jordan rose by 4.70 percent, while imports dropped by 29.27 percent. In July-September, Pakistan's exports to Oman rose by 10.73 percent, while imports surged by 97.40 percent.