Pakistan’s trade deficit with Middle East surges amid rising petroleum imports

Pakistan is currently facing a significant trade deficit with the Middle East, which has widened by 9.75 percent to $9.349 billion in the first eight months of the fiscal year 2024-25 when compared to $8.518 billion a year earlier. This increase is primarily attributed to a rising influx of petroleum products, reflecting the country’s growing dependency on these imports. In the past fiscal year, however, the trade imbalance with the Middle East saw an improvement where it narrowed by 20.47 percent to $13.014 billion from $16.365 billion in the preceding year. This change was mainly due to lower petroleum imports as local consumption decreased because of rising prices in the domestic market, showing a trend that underscores the volatility of oil prices and their impact on trade balances. During the notable period of July-February, 2024, exports to selected countries in the Middle East showed minimal growth, while imports saw a substantial uptick. Exports to the region rose by just 3.56 percent to $2.095 billion compared to $2.023 billion in the same time frame the previous year. Conversely, imports from the Middle East increased by 8.56 percent from $10.541 billion last year to $11.444 billion this fiscal year. This surge in imports and a relatively stagnant export growth reflect an underlying imbalance that is concerning for trade policies in Pakistan. The demand for Pakistani products did see an upturn with countries such as the United Arab Emirates, Saudi Arabia, and Qatar, which showcased a strong appetite for imports from Pakistan during this period. In detail, exports to Saudi Arabia increased significantly by 10.59 percent, totaling $489.44 million, up from $442.54 million the previous year. In FY24, exports to Saudi Arabia surged by as much as 40.98 percent to $710.335 million from $503.851 million year-on-year. Interestingly, imports from Saudi Arabia faced a notable decline, decreasing by 19.54 percent to $2.47 billion compared to $3.07 billion last year. Additionally, during FY24, imports from Saudi Arabia marginally dropped by 0.01 percent, solidifying a trend of reducing imports despite an alarming trade deficit. Moreover, exports to the United Arab Emirates also improved by 5.84 percent to $1.414 billion from $1.336 billion previously, highlighting the trading activity between these two nations. The leading Pakistani export products to the UAE include rice, bovine carcasses, cotton ensembles, guavas, and mangoes. In contrast, imports from the UAE experienced a striking increase of 30.11 percent, totaling $5.220 billion compared to $4.012 billion from the previous period. However, not every market presented positive indicators; exports to Bahrain fell dramatically by 27.79 percent, while imports from Bahrain surged by 27.32 percent, indicating shifting trade dynamics. Likewise, exports to Kuwait and Qatar also reflected declines, reinforcing concerns about declining export competitiveness amidst rising import bills.