Pakistan's trade deficit with Gulf countries widens as energy imports climb

Pakistan’s trade deficit with its Gulf partners widened in the first two months of the 2026-27 fiscal year, as imports from the region, especially energy, grew faster than exports, according to data compiled by the State Bank of Pakistan.

The deficit rose 2.61 per cent to $3.450 billion in July–August, compared with $3.362bn in the same period last year.

Exports up, but not everywhere

Overall, Pakistan’s exports to the Middle East grew 7.4 per cent to $550.045 million in July–August, up from $512.293m a year earlier. But the gains were uneven.

Exports rose strongly to Jordan (up 34.7 per cent), the United Arab Emirates (up 13.6 per cent) and Oman (up 5.9 per cent). Within the UAE, exports to Abu Dhabi, Ajman and Fujairah performed notably well. By contrast, exports fell to Saudi Arabia, Qatar, Kuwait and Bahrain, reflecting instability in the region. Exports to Saudi Arabia slipped 1.7 per cent, and exports to Qatar dropped 16.5 per cent.

Imports surge from key suppliers

On the import side, the picture was more dramatic. Imports from the Middle East rose 3.2 per cent to $4bn, compared with $3.874bn a year earlier. Among individual countries:

• Qatar: imports up 41.9 per cent
• Bahrain: up 39.4 per cent
• Kuwait: up 27.6 per cent
• Saudi Arabia: up 14.7 per cent, driven largely by oil
• UAE: down 1 per cent, due to lower petroleum and commodity inflows
• Oman: also down

The jump in purchases from Qatar marks a sharp reversal in energy-related buying and is expected to widen Pakistan’s deficit with Doha. Imports now exceed exports in Pakistan’s trade with Saudi Arabia, Qatar, Kuwait and Bahrain. The deficit with the UAE narrowed, while trade with Jordan and Oman stayed broadly balanced.

Dependence on Gulf energy

The figures highlight how dependent Pakistan is on Gulf energy. The UAE and Saudi Arabia together account for about 90 per cent of Pakistan’s energy imports from the region, while Qatar, Kuwait, Oman, Jordan and Bahrain play a smaller role.

The Middle East conflict that began on February 28 has disrupted Pakistan’s trade with the region, with exports to most Gulf states shrinking and imports rising, deepening the country’s external vulnerability. August was the sixth month of contraction since March, suggesting that trade flows are highly sensitive to developments along energy routes.

The longer view

The two-month figures come after a weaker year. In the 2025-26 fiscal year, Pakistan’s exports to the Middle East fell 2 per cent to $3.093bn, while imports fell 4 per cent to $16.413bn.

Why it matters

The Gulf is one of Pakistan’s most important economic partners, a major source of energy, investment and remittances, and a key market for food, textiles and other exports. A widening trade gap with the region means more foreign exchange flowing out to pay for imports, at a time when high oil prices are already pushing up inflation at home.

For exporters, the uneven picture suggests opportunity alongside risk. Growth in the UAE, Jordan and Oman shows demand exists where trade routes remain stable, while the declines in Saudi Arabia and Qatar reflect how quickly instability can hit sales. For policymakers, the data strengthens the case for diversifying energy sources and building export markets less exposed to regional conflict.

What to watch

The next months will depend heavily on the Gulf conflict and on oil prices. If energy prices stay high, Pakistan’s import bill from the region is likely to keep rising, making export growth to Gulf markets even more important for the balance of payments.

This article draws on State Bank of Pakistan data, as reported by Dawn.