Pakistan’s Growth Slows as Hormuz Crisis Hits Industry

Pakistan’s economy grew 2.0% in the April–June quarter, the final quarter of fiscal 2026. This measures how much economic activity increased during those three months and signals a sharp loss of momentum.

Growth had reached 4.42% in January–March, so the latest result was less than half as strong. It also missed economists’ 3.5% forecast, showing the slowdown was deeper than analysts expected. Rising energy costs and disrupted LNG supplies from Qatar weighed on industry and power generation.

The industrial sector contracted 4.7% during the quarter, while agriculture and services grew more than 3.5%. For the full fiscal year, Pakistan estimated growth at 3.65%, slightly below its earlier 3.70% projection. The figures suggest the energy crisis is straining businesses and government finances, with expensive fuel and gas likely to challenge recovery.

Pakistan’s industrial sector shrank 4.7% in the quarter ended June, as rising energy and fuel costs squeezed businesses. Factories consume substantial power and fuel. Higher costs therefore reduce production and weaken the broader economy.

Disrupted traffic through the Strait of Hormuz interrupted regular LNG deliveries from Qatar and the UAE. Pakistan sourced 99% of its LNG from Qatar last year. Expensive spot purchases then raised power-generation costs and strained companies.

That industrial contraction helped drag overall GDP growth to 2.0% in April–June, below the 3.5% forecast. Pakistan now faces possible winter gas shortages, while securing LNG could push its import bill above $1 billion.

Pakistan is highly dependent on LNG from Qatar. Last year, Qatar supplied 99% of Pakistan’s LNG imports under long-term contracts. This matters because disruptions threaten energy supplies, power costs, and economic recovery.

When traffic through the Strait of Hormuz was disrupted, Qatar and UAE LNG flows were severely affected. Pakistan turned to expensive spot purchases instead. These purchases raise power-generation costs and could push the import bill above $1 billion for coming months.

The immediate risk is natural-gas shortages during winter. Pakistan’s industry already contracted 4.7% in the April-June quarter, while overall GDP growth slowed to 2.0%. Continued disruption could further strain government finances, increase electricity costs, and weaken industrial activity.

The Strait of Hormuz is a narrow sea passage between Iran and Oman, linking the Persian Gulf with the wider ocean. It matters because ships carrying oil and liquefied natural gas use it to reach customers worldwide. A disruption can therefore raise fuel costs and threaten supplies far beyond the Middle East.

Pakistan shows how this works. Last year, it obtained 99% of its LNG imports from Qatar through term contracts. When traffic was disrupted, Pakistan had to buy costly spot cargoes instead, pushing up power-generation costs and potentially increasing its import bill above $1 billion.

That pressure is already visible in the source article. Pakistan’s economy grew just 2.0% in April-June, versus 4.42% in the previous quarter, while industry shrank 4.7%. With Qatari and UAE LNG flows still disrupted, Pakistan faces possible winter shortages and higher costs; countries dependent on the route face similar risks.

Higher LNG and fuel prices make electricity more expensive. Power plants must pay more for the gas and other fuels they burn. Those costs can raise power prices or require government support. Either way, Pakistan faces more pressure on its budget and import bill.

Pakistan sourced 99% of its LNG from Qatar under term contracts last year. This year, disrupted Hormuz traffic forced it toward expensive spot purchases. Those purchases have increased power-generation costs and could push the import bill above $1 billion for coming months.

Qatari and UAE LNG flows remain severely disrupted, creating potential gas shortages during winter. That matters because industry contracted 4.7% in the fourth quarter, while overall GDP growth slowed to 2.0%. With fuel costs spiraling, the government has less room to protect growth without worsening its fiscal strain.

Long-term LNG contracts gave Pakistan a dependable supply and more predictable prices. That stability matters because gas fuels electricity generation and supports the national import budget for households and businesses.

Last year, Pakistan obtained 99% of its LNG imports from Qatar through term contracts. When traffic through the Strait of Hormuz was disrupted, Qatar’s regular deliveries became unreliable, forcing Pakistan into spot-market buying. Spot cargoes cost more because buyers compete for limited available gas during an emergency.

This shift has already raised power-generation costs and could push the coming LNG import bill above $1 billion. Pakistan’s economy grew only 2.0% in April–June, while industry contracted 4.7%. Disruptions could deepen winter shortages, pressure the budget, and threaten its IMF-supported recovery.

Gross domestic product, or GDP, measures the value of goods and services produced inside a country. It matters because its growth shows whether economic activity is expanding or slowing. Each sector’s result contributes according to its size in the economy.

Pakistan illustrates how sectors combine. In April–June 2026, industry contracted 4.7%, while agriculture and services each grew more than 3.5%. Overall GDP still grew 2.0%, but the industrial decline helped make growth much weaker than the previous quarter’s 4.42%.

Energy disruptions explain much of the pressure. High fuel costs and disrupted LNG supplies from Qatar raised power costs, hurting factories and straining government plans. For FY 2026, Pakistan lowered its growth estimate slightly, from 3.70% to 3.65%. That shows how one sector’s weakness can pull down the national result, even when other sectors expand.