Pakistan to Save Over $2 Billion in Import Bill Thanks to Trump’s New Trade Tariffs: Report

In the wake of the escalating global tariff war, Pakistan stands to gain substantial economic relief and save over $2 billion in import bill due to a significant drop in commodity prices, particularly crude oil, RLNG, and coal.

In the aftermath of the tariff war initiated by the US and retaliated by other nations, the Bloomberg commodity index has declined by 8 percent in the last three sessions. Within this, crude oil prices (Brent) and Richards Bay coal futures (April) are down by 14.3 percent to US$64.2 per barrel and 6.1 percent to US$88.5 per ton, respectively.

Topline noted that the falling commodity prices will impact Pakistan’s macroeconomic indicators, including external accounts, primarily the current account, inflation, and fiscal accounts, among others. For instance, if oil prices decline by US$10 per barrel, this would reduce the oil-related import bill (including RLNG) by US$2-2.1 billion. In addition to oil, Pakistan can also save US$250-300 million annually from coal, LPG, and palm oil if lower levels of prices persist. Oil prices also affect inflation directly, and with a US$10 per barrel decline in oil, inflation would be directly impacted by 20 basis points, assuming the benefit is passed on to consumers. The details are outlined below:

• Pakistan Imports 20 million tons of crude and refined oil annually: During FY24, Pakistan imported 9 million tons of crude and 10.3 million tons of refined oil (HSD, petrol, etc.), translating into a total of approximately 145 million barrels of equivalent oil. Every US$1 per barrel decline in oil prices will reduce the import bill by US$145-150 million, and every US$10 per barrel decline will result in savings of US$1.5 billion on the petroleum oil front.

• Pakistan Imports US$4 billion of RLNG annually: Alongside oil imports, Pakistan also imports RLNG worth US$4 billion, or 400 million MMBtu, annually. RLNG prices are linked to oil prices, and a change of US$1 to US$10 per barrel can save US$60 million to US$600 million in RLNG imports annually.

• Pakistan Imports 10 million tons of coal annually: Pakistan imports coal worth US$1-1.2 billion annually. With every change of US$10 per ton in coal prices, the coal import bill will decrease by US$100 million.

These three commodities can save US$2-2.1 billion of Pakistan’s imports, which accounts for 3.5-4 percent of Pakistan’s total imports. Additionally, savings of around US$150-200 million can also be achieved through other imports such as palm oil (US$3 billion total imports) and LPG (US$1 billion total imports), due to their direct/indirect link to oil prices.

• Pakistan Inflation: Pakistan’s inflation is also influenced by changes in oil prices. A US$10 per barrel (~Rs. 18 per liter) reduction in international prices would lead to a direct impact through a decline in petrol/diesel prices of approximately 20 basis points. The indirect and lagged impact will also be visible on transport services and other areas, contributing to a further 10-15 basis points.

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• Exports May Be Negatively Impacted: Despite these positive developments, the imposition of 29 percent tariffs on Pakistan’s goods exports to the U.S. could put pressure on the textile sector, which constitutes 75 percent of Pakistan’s total exports to the U.S. Any decline of 5-10 percent in textile exports to the U.S. could affect the export bill by US$200-450 million.

• Remittances from Gulf Countries Were Down 5-6 percent in FY17 and FY18: During 2016, when oil prices crashed and went below US$40 per barrel, remittances from Gulf countries were impacted with a lag of 6-12 months, dropping by 5-6 percent. Total remittances were down by 3 percent in FY17 and up by 3 percent in FY18.

• In FY17/18, remittances from Gulf countries (KSA, UAE, and other GCC) constituted 64 percent of total remittances, whereas in the first 8 months of FY25, this concentration has reduced to 55 percent.

Currently, oil prices are well above the 2016 prices (when they fell below US$40), so the report doees not expect any significant impact on remittances. In the worst-case scenario, a 5 percent decline in Gulf remittances could reduce overall remittances by 2.7 percent or US$1 billion.

• Rating Upgrade May Be Affected Due to Global Tensions: Due to uncertainty in global economies amidst tariffs, the rating upgrade for frontier emerging countries like Pakistan may be delayed, as rating agencies tend to act conservatively in uncertain times. Furthermore, rating agencies may assess Pakistan’s external inflows—exports, remittances, and debt borrowing—which could be affected.

• Pakistan Market: Although foreign inflows into domestic stocks may be impacted due to uncertainty, the report says the market performance will remain unaffected due to strong liquidity from local funds, as there is a continuous conversion from fixed income to equities. Additionally, sectors affected by the decline in oil prices and export dynamics (E&Ps, IT, and textiles) account for around 20 percent of the benchmark index, while the fundamentals of companies with 80 percent weightage are based on the domestic economy, which is recovering from higher inflation and interest rates.

The report maintains its base case index target of 127,000 for December 2025. However, with higher liquidity, the index could surpass the 150,000 mark, assuming successful IMF reviews and political stability.