Pakistan’s trade deficit with Gulf countries narrows in first month of FY2026-27
In July, Pakistan’s imports from Gulf states fell sharply, especially energy purchases, while exports modestly rose, narrowing the trade gap with the region.
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Desk Analysis
How This Affects the Exchange
Sector Effect
Positive · Buy bias
Reduced Gulf energy imports narrow the trade deficit, supporting PKR and market sentiment – Buy bias on related sectors.
Sectors & Direction
Desk read
Desk call: Buy bias · Positively affected
- Oil & GasPositively affected
- EconomyPositively affected
- MarketsPositively affected
Companies
Mentions in This Briefing
Sectors: Oil & Gas, Economy, Markets — Positive · Buy bias. PSX tickers: MEBL, MCB, UBL, HBL, BAHL, FABL. Reduced Gulf energy imports narrow the trade deficit, supporting PKR and market sentiment – Buy bias on related sectors.
Full Story
Open on Dawn## Overview
Pakistan’s trade balance with Gulf nations improved in the first month of FY2026-27 as import volumes collapsed and export receipts grew modestly. The State Bank of Pakistan’s data shows a 44.3% drop in imports from the Gulf in July, contrasted with a 5.6% rise in exports.
## Export Performance
Exports to the Gulf region reached $271.60 million in July, up from $257.16 million a year earlier. The increase was led by the United Arab Emirates, Saudi Arabia and Jordan. Saudi export receipts grew about 4.5%, while UAE shipments rose 9% year‑on‑year, driven by higher sales from Abu Dhabi, Ajman and Fujairah. Jordan also posted a 13.7% export gain. Conversely, exports to Qatar fell 16% and to Kuwait slipped 10.5%.
## Import Collapse
The sharp import decline was energy‑driven. Pakistan slashed petroleum and LNG purchases from the UAE, Kuwait and Qatar, with imports from Kuwait plunging nearly 97% and from Qatar falling almost 78% compared with July 2025. Overall Gulf imports fell to $879.98 million in July, down from $1.578 billion a year earlier. Imports from Bahrain rose 118%, turning it into a net exporter to Pakistan for the month.
## Trade Deficit Narrowing
The combined effect narrowed the trade deficit with the Gulf. In FY26, total imports from the region fell 4% to $16.413 billion, while exports slipped just over 2% to $3.093 billion. The reduced energy import bill eases pressure on the foreign exchange reserves and the Pakistani rupee.
## Macro Implications
The data underscores the sensitivity of Pakistan’s import flows to geopolitical developments in energy corridors. A lower energy import bill can support the balance of payments, potentially stabilising the PKR and improving investor sentiment on the Pakistan Stock Exchange.
## Outlook
If the trend of reduced energy imports continues, the macro environment may become more favourable for equities, especially those less dependent on imported inputs. However, companies reliant on imported petroleum and LNG could face supply constraints.
## Key Takeaways
- Exports to Gulf rose modestly, led by UAE and Saudi Arabia. - Energy‑related imports from Gulf fell dramatically, cutting the trade deficit. - The narrowing deficit may bolster the PKR and improve overall market sentiment.