Pakistan GDP growth halves in Q4 as Hormuz crisis disrupts LNG imports

The Pakistan Bureau of Statistics reported that the economy expanded at an annualized rate of 2.0% in the April-June quarter of fiscal 2026, sharply down from the 4.42% growth in January-March and below the 3.5% predicted by economists in a Bloomberg survey. For the full fiscal year ending June 2026, Pakistan now expects GDP growth of 3.65%, slightly lower than the 3.70% previously estimated.

The slowdown was driven by a 4.7% contraction in the industrial sector during the fourth quarter, while agriculture and services both grew more than 3.5%. The statistics office noted that the fourth quarter was "seriously affected" by high energy costs, with the disrupted traffic at the Strait of Hormuz sending procurement costs for gas and fuels spiralling higher.

Pakistan sourced 99% of its LNG imports from Qatar under term contracts last year. This year, the country has been forced to turn to expensive spot purchases, pushing power generation costs higher and threatening to raise the import bill to over $1 billion for the coming months. The head of Pakistan's state-owned LNG importer warned last week that the country faces challenging winter months with potential natural gas shortages as Qatari and UAE LNG flows from the Strait of Hormuz remain severely disrupted.

Analysis

Why This Matters

The slowdown threatens Pakistan's fragile economic recovery, which had been propped up by an IMF programme.
Soaring energy costs and LNG shortages could trigger broader economic pain, including higher inflation and a widening current account deficit.
Disruption at the Strait of Hormuz, a critical chokepoint for global energy, is now directly hitting a major South Asian economy.

Background

Pakistan has struggled with balance-of-payments crises and relied on IMF support in recent years. The country is heavily dependent on imported LNG, mostly from Qatar via the Persian Gulf. The Strait of Hormuz crisis, which began earlier in 2026, has disrupted shipping lanes, reducing LNG tanker traffic and driving spot prices sharply higher. Pakistan's limited foreign-exchange reserves make it vulnerable to costly spot purchases.

Key Perspectives

Pakistan's government: The slowdown is largely external, driven by energy supply disruptions beyond its control. Officials are likely to seek emergency talks with Qatar and other suppliers to secure volumes before winter. IMF and international creditors: The slowdown may complicate Pakistan's compliance with IMF programme targets, potentially requiring revised fiscal and monetary frameworks. Critics: Soaring energy costs and the need for more expensive spot LNG highlight Pakistan's longstanding failure to diversify energy sources and invest in domestic production, leaving the economy exposed to external shocks.

What to Watch

Winter-month natural gas shortages and any government measures to ration industrial fuel or subsidise imports.
Pakistan's foreign-exchange reserves and the trajectory of its import bill for LNG.
Any diplomatic or military developments at the Strait of Hormuz that could restore or further disrupt shipping.

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12 claims in this story checked against 1 source: 12 supported.

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SupportedPakistan GDP growth halves in Q4Oilprice.com: “more than twice as slow in April to June compared to the 4.42% growth in January-March”
SupportedHormuz crisis disrupts LNG importsOilprice.com: “disrupted traffic at the Strait of Hormuz... LNG flows from the Strait of Hormuz remain severely disrupted”
SupportedIndustry contracts 4.7% in April-June quarterOilprice.com: “Industry alone contracted by 4.7% in the fourth quarter of FY 2026”
SupportedFull-year growth estimate trimmed to 3.65%Oilprice.com: “now expects its GDP growth rate at 3.65%, slightly lower than 3.70% estimated previously”
SupportedGDP growth slowed to 2.0% in Q4 FY2026Oilprice.com: “GDP growth was 2.0% in the quarter ended June”
Supportedless than half the 4.42% growth in previous quarterOilprice.com: “more than twice as slow... compared to the 4.42% growth in January-March”
Supportedbelow the 3.5% predicted by economists in Bloomberg surveyOilprice.com: “below the 3.5% growth expected in a Bloomberg survey”
Supportedstatistics office noted fourth quarter 'seriously affected' by high energy costsOilprice.com: “only the fourth quarter seriously affected by the high energy costs”
SupportedPakistan sourced 99% of LNG imports from Qatar under term contracts last yearOilprice.com: “Last year, Pakistan sourced 99% of its LNG imports from Qatar, under term contracts.”
Supportedthreatening to raise import bill to over $1 billionOilprice.com: “could raise the import bill to over $1 billion to secure LNG for the coming months.”
Supportedhead of Pakistan's state-owned LNG importer warned of challenging winter months with natural gas shortages as Qatari and UAE LNG flows remain disruptedOilprice.com: “Pakistan faces challenging winter months with potential natural gas shortages as the Qatari and UAE LNG flows from the Strait of Hormuz remain severely disrupted, the head of the Pakistani state-owned LNG importer said last week.”
Supportedagriculture and services grew more than 3.5%Oilprice.com: “agriculture and services grew by more than 3.5%”