How support from Saudi Arabia and UAE helped Pakistan's economy

As Pakistan's economic challenges mounted in recent years, the support of two Gulf countries — Kingdom of Saudi Arabia and the United Arab Emirates — (and of course, China) was crucial to the improvement in its economic outlook.

Nukta takes a look at how support from the Gulf countries helped keep Pakistan's economy afloat.

Financial support and remittances

Over the past five years, Pakistan has received substantial financial assistance from the UAE and Saudi Arabia in the form of loans, remittances, and trade volumes.

Remittances, in particular, have played a vital role in maintaining the balance of payments, helping to cover import bills. In the last three fiscal years, Pakistan has received nearly $2.8 billion per month in remittances from overseas Pakistanis, with around 40% coming from the UAE and Saudi Arabia.

Contributions from other Gulf Cooperation Council (GCC) countries, such as Kuwait, Bahrain, Qatar, and Oman, have also been significant, averaging around $3 billion per annum.

Foreign direct investment and trade

Pakistan has actively sought to attract foreign direct investment (FDI) from Gulf countries through the Special Investment Facilitation Council.

This platform has successfully increased FDI from Saudi Arabia and the UAE, which rose to over $10 million in FY23.

Both countries have shown interest in sectors such as agriculture and mining, where significant investment opportunities exist.

The UAE has become Pakistan's second-largest export destination.

Both countries are also major destinations for Pakistani labor, with over 2.6 million Pakistanis living in Saudi Arabia and another 1.8 million in the UAE.

Debt relief

In August last year, Saudi Arabia, the UAE, and China announced a debt rollover for one year to support Pakistan's $7 billion bailout package with the International Monetary Fund (IMF).

The Saudi Fund for Development extended its $3 billion deposit to Pakistan for another year in November 2023, while the UAE deposited $1 billion in Pakistan's central bank to shore up reserves.

Pakistani entrepreneurs are increasingly looking to the UAE as an export destination and trading hub due to its strategic location and ease of doing business.

Over 3,000 Pakistani companies registered with Dubai's Chamber of Commerce in 2023 alone, bolstering trade and investment ties between the two countries.

Analysts believe that the potential for attracting investment from Saudi Arabia and the UAE is promising, especially as these nations expand their global economic footprint. If Pakistan can present attractive and well-structured projects, it could encourage these countries to increase their investment levels.