A temporary breather in RLNG import

EDITORIAL: The recent international oil price crisis due to the ongoing war, which has engulfed the Gulf region, is fortunately not creating havoc for Pakistan’s economy as it did during the crises of 2022 and 2008. The fiscal side is cushioned, as the government is fully passing on the impact of higher prices to consumers while charging the full levy. Plus, the absence of RLNG supply from Qatar is becoming a blessing in disguise. And whatever increase there is in the trade deficit is being well cushioned by growth in home remittances and services exports, keeping the current account comfortable.

The problem is the stagnation of goods exports, where there is no new star. And whatever increase there is in exports is due to the government providing fiscal and monetary incentives. The issue is that, be it textiles or other sectors, exports are failing to rise without crutches. That is not a good omen.

Based on the central bank’s data on the current account, here is an analysis of six months of war, from March to August 2026. Surprisingly, despite Brent oil prices averaging $99 per barrel, while petroleum product prices were even higher, the current account cumulatively posted a marginal surplus of $49 million, compared to a surplus of $586 million in the same period of 2025 when oil prices averaged $69 per barrel.

Goods imports in March-August 2026 stood at $34.3 billion, with a monthly average of $5.7 billion, up 9 percent YoY. That is not bad, given that oil prices have risen by 43 percent, while petroleum products’ prices are even higher. One of the reasons for low import growth is lower RLNG imports, which are down by half despite rising prices. That is due to force majeure declared by our long-term contract supplier, QatarEnergy (formerly known as Qatar Petroleum).

That has turned out to be a blessing in disguise, as we are contracted to buy 10 cargoes a month while demand is close to half that level. In the last six months, we managed to receive less than one-third of the cargoes, resulting in a lower import bill. The impact of the lower supply has been limited, as there were only two to three hours of load-shedding in Punjab during the peak summer months. Had supply been normal, based on higher prices, the import bill could have been higher by $1.5 billion.

Thus, the $1.5 billion saving is simply due to rationed RLNG supply. On the flip side, petroleum imports are up 19 percent in March-August. However, the bill is still 25 percent lower than during the same period of the 2022 crisis. One reason is lower demand due to the passing on of higher oil prices to consumers. The other is a decline in diesel demand in agriculture and backup power generation due to the widespread adoption of solar and other renewables over the last four years.

The medium- to long-term worry in the aftermath of the Gulf crisis is a possible slowdown in these economies and, in turn, lower demand for workers. That could directly impact Pakistan’s home remittances, more than half of which come from the GCC countries. However, inflows continue to rise from a higher base. They are up 8 percent in March-August 2026.

Another blessing in disguise is the money coming back, or no longer going out, from GCC countries, especially the UAE. This is evident from the negative spread in the hundi-hawala market, which implies there are net inflows in the grey market. Plus, many people are perhaps sending savings parked in the GCC countries back home.

The third factor is the upbeat performance of services exports, which are up 23 percent in March-August, while the services trade deficit is down to one-third. One of the reasons for better remittances and services exports is lower taxation. Resident Pakistani professionals have an incentive to work as freelancers, as the tax advantage of doing so is over 30 percent. Plus, there may be some cases of goods exports being disguised as services exports or remittances due to lower taxation.

The FBR must look into this and should start taxing these incomes marginally to reduce the gap between formal domestic workers and freelancers. Anyhow, the point is that economic fragility due to oil prices is declining, and energy issues have somehow subsided due to the increased adoption of renewables. That can avert a crisis, but may not be able to kick-start growth, as the missing link is taxation reform.

Copyright Business Recorder, 2026