Pakistan’s trade deficit with Middle Eastern countries recorded a measured contraction in the first quarter of FY26, driven primarily by a decline in both imports and exports, according to the latest figures released by the State Bank of Pakistan. The data reflect a shift in Pakistan’s energy sourcing strategy and underline the persistent structural imbalance in regional trade, even amid short-term improvement.
During July to September FY26, the trade gap with Middle Eastern nations fell 3.99 percent to 3.558 billion dollars, down from 3.706 billion dollars in the corresponding period of last year. This quarterly adjustment stands in contrast to the full-year performance of FY25, when the deficit widened 7.37 percent to 13.974 billion dollars compared to 13.014 billion dollars the previous year. Analysts note that the current reduction, while modest, signals the early impact of Pakistan’s evolving energy procurement routes and incremental diversification efforts.
A notable driver of the narrower deficit was the 5.48 percent drop in imports from the Middle East, which totaled 4.274 billion dollars during the first quarter compared with 4.522 billion dollars a year earlier. Much of this moderation stemmed from lower oil imports, particularly from the United Arab Emirates. Pakistan’s decision to begin sourcing crude oil from the United States under a new supply arrangement has reduced pressure on Gulf-origin energy purchases, providing short-term relief to the import bill.
Exports to Middle Eastern markets, however, also weakened during the period, falling 12.19 percent to 715.63 million dollars from 815.04 million dollars last year. This decline mirrors the broader export stagnation seen in FY25, when outbound shipments to the region fell 1.52 percent to 3.107 billion dollars while imports into Pakistan climbed to 17.081 billion dollars, further widening the annual gap. Exporters continue to grapple with limited product diversification and competitive challenges in sectors such as food commodities, textiles, and meat.
The shift in trade dynamics comes as Pakistan recently concluded a free trade agreement with the Gulf Cooperation Council. Policymakers view the GCC FTA as a strategic tool to expand market access for Pakistani goods, strengthen commercial links, and eventually address the longstanding asymmetry in trade volumes. However, the agreement’s benefits will materialize gradually as tariff schedules and compliance protocols are implemented.
Country-specific data for the first quarter highlight mixed performance. Exports to Saudi Arabia dropped 8.94 percent to 160.24 million dollars, while imports from the kingdom fell 16.99 percent to 884.01 million dollars. Trade with the UAE was more uneven: exports dipped 12.95 percent to 491.58 million dollars, but imports increased 7.61 percent to 2.163 billion dollars, reinforcing the UAE’s position as Pakistan’s dominant regional trade partner. Key export categories to the UAE include rice, bovine meat, cotton apparel, and fresh produce such as mangoes and guavas.
Trade patterns with smaller Gulf states also fluctuated. Exports to Bahrain contracted to 12.79 million dollars while imports surged to 76.02 million dollars. Exports to Qatar declined to 23.63 million dollars, and imports slid 12.21 percent to 781.34 million dollars. Exports to Kuwait showed slight improvement, rising to 27.39 million dollars, while imports from Kuwait dropped to 369.84 million dollars.
Officials monitoring trade flows note that petroleum sourcing continues to dominate Pakistan’s commercial relationship with the Middle East, shaping the trajectory of the deficit. While Q1 data offer a temporary narrowing, sustained improvement will depend on Pakistan’s ability to expand its export base, diversify product categories, and reduce structural reliance on imported fuels.
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