Pakistan’s economic ties with the Middle East are entering a precarious territory, characterized by an alarming trade deficit that has ballooned to $11.731 billion over the first ten months of the current fiscal year (July–April FY25). This shift marks a 9.89% increase from the $10.675 billion registered the previous year, a trend that is causing concern among policymakers and citizens alike.
One key factor behind this widening gap is the rising cost of energy imports, particularly crude oil. According to the State Bank of Pakistan, crude oil imports have surged by 14.9%, which has significantly inflated overall imports from the region. Meanwhile, exports are lagging, unable to keep pace with the growing consumption. Alarmingly, this uptick in energy imports is reversing the progress made in FY24, when the trade deficit narrowed by 20.47%—a change largely attributed to curtailed consumption due to soaring domestic prices.
In the first ten months of FY25, imports from the Middle East rose by 8.76%, climbing to $14.355 billion compared to $13.198 billion in the previous fiscal year. Conversely, exports to the region saw a modest 4% increase, totaling just $2.624 billion against $2.523 billion from the past year. This stark contrast is particularly pronounced when viewed against the backdrop of FY24, where imports had seen a considerable decline of 13.53% to $16.16 billion, while exports enjoyed remarkable growth of 35.23%, jumping from $2.33 billion to $3.155 billion.
To counteract this escalating trade deficit, Pakistan has recently pursued a free trade agreement with the Gulf Cooperation Council (GCC). This strategic initiative is part of a broader effort to recalibrate and strengthen trade relations with essential partners across the region.
Focusing on individual countries, the data reveals a mixed performance in trade relationships:
**Saudi Arabia** has shown some resilience; exports increased by 4.49% to $605.39 million during the first ten months of FY25. However, this pales in comparison to the significant 40.98% surge in exports witnessed in FY24, which reached $710.335 million. Notably, imports from Saudi Arabia have declined by 16.26%, totaling $3.176 billion.
In the **United Arab Emirates (UAE)**, exports have grown by 8.67%, totaling $1.779 billion from July to April FY25. The previous year, exports surged by an impressive 41.15% to $2.082 billion due to strong demand from Dubai. Key Pakistani exports to the UAE include rice, bovine carcasses, and cotton garments. However, imports from the UAE soared dramatically by 30.81%, reaching $6.614 billion.
On the other hand, trade relationships with **Qatar** have not fared well—exports plummeted by 27.87% to $100.51 million, while imports increased by 7.83%, totaling $2.933 billion. **Kuwait’s** scenario is similarly bleak, with exports dropping by 10.84% to $97.59 million, and imports barely budging by 1.69%, reaching $1.453 billion. Finally, **Bahrain** has seen exports sharply decline by 28.66% to $41.93 million, while imports rose by 18.37%, amounting to $179.41 million.
Even with recent improvements in exports, particularly to key markets like the UAE and Saudi Arabia, the overall gains remain insufficient to offset the heavy burden brought about by soaring oil imports. As the trade deficit exceeds $11.7 billion, the tilt toward imports—especially in petroleum—raises significant alarm. For Pakistan, this ongoing trade imbalance with the Middle East continues to pose a challenge that requires urgent attention and effective policy intervention, despite ongoing diplomatic and economic initiatives.
