Page 61 - CMA Journal (Mar-Apr 2026)

The imports are dominated by petroleum and energy While the Government of Pakistan has historically supported
products, machinery and industrial inputs, and chemicals exporters through subsidized nancing schemes, these
and intermediate goods. facilities are now linked to the policy rate and access to them
is limited. Consequently, higher nancing costs have
"Pakistan's heavy reliance on LNG from Qatar and the UAE
become a key factor in reducing export competitiveness.
means any shock to supplies through the Strait of Hormuz
would be felt very quickly," the Financial Times reported, Currency depreciation and cost pass-through have created
quoting market analytics. — Dawn, April 28, 2026 compounding economic obstacles, as the theoretical export
advantage is nulli ed by rising costs of imported energy and
GCC Trade Dynamics raw materials, ultimately widening the trade gap and
fuelling domestic in ation.
Pakistan's trade relationship with the GCC countries re ects
a signi cant imbalance. Pakistan's exports to the GCC are As per Arab News on 6th April 2026, there is a strategic
relatively low in volume, while imports, primarily oil and gas, dimension to consider beyond just prices. Pakistan's high
are signi cantly higher. dependence on Gulf energy imports leaves it particularly
vulnerable to external shocks, as it has limited buffers to
As per different sources, Pakistan exports to the GCC in the absorb sudden disruptions, unlike larger economies that
range of $2–3 billion while imports exceed $15–17 billion, maintain diversi ed energy sources and substantial strategic
creating a large trade de cit. In a recent period, imports from reserves. This lack of resilience magni es the impact of every
the GCC exceeded $4 billion in a single quarter, signi cantly geopolitical event in the region.
surpassing exports. In this, the UAE alone accounts for a
Pakistan maintains an active presence in the GCC through
signi cant portion of exports (around $1.7–1.8 billion). This
liaison offices in Dubai and Abu Dhabi, covering textiles,
imbalance is driven by energy dependency. (Sources:
food and services, particularly in the IT sector. These hubs act
Pakistan Bureau of Statistics (PBS), International Trade
as critical pivots for marketing, business-to-business (B2B)
Centre, State Bank of Pakistan)
networking and regulatory facilitation in the Gulf. This
Energy and Competitiveness creates indirect vulnerabilities, as disruptions in the GCC can
affect export operations and may impact trade orders and
One of the most underappreciated risks in Pakistan's trade export proceeds.
exposure is the direct link between energy costs and export
competitiveness. Geopolitical Risks
Rising energy costs increase production costs, which are a The escalating tensions in the Middle East are impacting
major input in textile manufacturing, fertilizer and shipping routes, speci cally the Strait of Hormuz and the Red
agriculture, and industrial processing. As oil prices rise, Sea. The uncertainties and security concerns along these
electricity and gas tariffs increase, directly impacting shipping routes are causing signi cant delays and rising
production costs across export sectors. Given that Pakistan insurance premiums. As Pakistan relies signi cantly on the
competes in price-sensitive global markets, even marginal GCC for its energy imports, this regional con ict threatens
cost increases can erode competitiveness. the consistent supply of oil and LNG.
Geopolitical shocks amplify energy price volatility and "The crisis threatened Pakistan's external sector and can
recent tensions in the Middle East have already disrupted oil potentially decrease Pakistan's direct export to the GCC
supply chains. These disruptions have forced the rerouting of countries by $1.5 to $2 billion depending on the closure of
oil supplies, as Pakistan relies heavily on shipping routes the Strait of Hormuz while decline in Pakistan imports from
through the Strait of Hormuz and the Red Sea. Such the GCC countries, predominantly energy could drop by $3
disruptions result in higher freight and insurance costs; billion." — The Middle East Crisis Impact on Pakistan's Trade,
delays in supply chains; and increased landed cost of energy. Policy View Point: NO.56:2026 PIDE

Export margins are now under extreme pressure due to Pakistan's trade balance with the GCC remains highly
rising energy costs and exporters face shrinking margins skewed, with exports to the region remaining low or
while competing countries gain a relative advantage, and declining and imports remaining high due to energy needs,
Pakistani exporters risk losing market share. The increase in further widening the trade de cit. Exports to the Middle East
energy prices directly contributes to rising in ation in dropped by over 6% in the rst half of FY26. Furthermore,
Pakistan. This in ation, in turn, leads to an increase in the instability in the Gulf poses risks to remittance in ows, which
policy rate, which adversely affects the competitiveness of constituted about 54.5% of total remittances in early 2026,
putting pressure on foreign exchange reserves.
exports by raising the nancial costs for exporters.

59 ICMA’s Chartered Management Accountant, Mar-Apr 2026