Gulf tensions

Pakistan's external sector remains fragile despite recent macroeconomic stabilization, with a current account deficit of $139m in FY26 largely offset by $41.6bn in remittances. Weak exports, rising food imports, and energy vulnerabilities exacerbated by Gulf tensions highlight structural weaknesses in agricultural planning and policy inconsistency.

The State Bank of Pakistan's Monetary Policy Committee is unlikely to raise the policy rate in its June 15 meeting due to eased Gulf tensions and stable oil prices. The only rate hike in FY26 occurred on April 27, but analysts note improved supply chain conditions and prospects for a US-Iran deal have reduced inflationary pressures.

The U.S. imposed a naval blockade on Iran amid failed high-level talks in Pakistan, with tensions escalating in the Gulf. Pakistani General Mohammed Saeed suggested diplomacy remains possible despite the blockade and collapsed negotiations.