ISLAMABAD: The federal government has activated an emergency energy contingency plan to ensure uninterrupted fuel and gas supplies amid escalating tensions in the Gulf region, while Pakistan’s trade deficit widened by 25% to $25 billion during the first eight months of the current fiscal year.
A ministerial committee tasked with maintaining smooth petroleum supplies briefed Prime Minister Shehbaz Sharif on Tuesday after Qatar signalled it may not be able to supply scheduled liquefied natural gas (LNG) cargoes due to the ongoing Gulf conflict.
The prime minister authorised the committee—headed by Finance Minister Muhammad Aurangzeb and comprising representatives from the Petroleum Division and other key stakeholders—to take all necessary decisions to sustain seamless energy supplies.
Gas Rationing, Production Boost
Under the contingency plan, the government will immediately restore around 350 million cubic feet per day (mmcfd) of local gas production that had earlier been curtailed to accommodate surplus LNG imports.
To manage demand, gas supplies to fertiliser plants will be suspended, while allocation to power plants will be reduced from 250 mmcfd to 80 mmcfd. Supplies to CNG stations may also be curtailed if required. Officials, however, assured that fertiliser shortages are unlikely due to existing stocks exceeding 800,000 metric tons.
To meet peak evening electricity demand, some previously closed power plants may be operated on alternative fuels. Household gas rationing is also under consideration in light of the evolving situation.
Oil Supply Risks Amid Gulf Tensions
Pakistan’s crude oil supply chain faces potential disruption due to instability in the Strait of Hormuz and the Red Sea. Officials indicated that the prime minister may request Saudi authorities to route oil shipments through the Red Sea if the Strait of Hormuz remains inaccessible.
Crude oil prices climbed above $83 per barrel on Tuesday, raising concerns about increased fuel prices, inflationary pressure and further strain on the current account. LNG prices have also surged due to supply constraints, complicating efforts to secure cargoes from alternative sources.
Trade Deficit Deepens
Meanwhile, the Pakistan Bureau of Statistics (PBS) reported that the trade deficit expanded to $25 billion during July–February, marking a $5 billion or 25% increase compared to the same period last year.
Exports declined across all benchmarks—month-on-month, year-on-year and cumulative eight-month performance. Total exports stood at $22.7 billion, down 7.3% or $1.6 billion compared to last year.
In contrast, imports rose 8.1% to $45.5 billion, an increase of $3.4 billion. Despite import tax reductions aimed at boosting exports under trade liberalisation measures, the anticipated export growth has not materialised.
Exporters attribute the slowdown to an overvalued rupee, which hovered around Rs279.5 against the dollar. They argue that the gradual appreciation of the currency has eroded competitiveness and profitability.
In February alone, exports dropped to $2.3 billion—down 9% year-on-year—marking the seventh consecutive month of decline. Imports contracted marginally by 1.6% to $5.3 billion but remained above the $5 billion mark for the eighth straight month. Consequently, the monthly trade deficit widened 5% year-on-year to $3 billion and increased 8.5% compared to January.
While higher remittance inflows and central bank foreign currency purchases have helped cushion external pressures, officials warned that a prolonged Gulf conflict could also impact remittances, adding further uncertainty to Pakistan’s fragile external account position.
