Pak-Saudi relations: Transition and a new era of cooperation 

Once again, Pakistan is looking toward Saudi Arabia for vital financial assistance to secure the International Monetary Fund’s (IMF) fresh loan program to stave off a balance of payments crisis. The Shehbaz Sharif-led coalition government has requested the Kingdom to enhance its lending by about $1.2 billion from the existing $5 billion portfolio to help bridge the external financing gap.

Saudi Arabia has always responded positively to all of Pakistan’s requirements, including financial and diplomatic, at all levels. 

Islamabad now looks toward three friendly partners – Saudi Arabia, UAE and China – for $12bn loan rollovers to secure the IMF loan. The re-profiling or rollover of this $12bn is a prerequisite set by the IMF under the $7bn Extended Fund Facility.

Pakistan has now requested an additional $1.2bn from Riyadh, which is expected to come in the form of a bilateral commercial loan, though it could also be in the form of a safe deposit. 

Pakistan and Saudi Arabia will be entering a new era of mutual investments and sustainable development soon, leaving behind the troublesome legacy of loans and financial assistance.

Sajjad Qamar

The good news to some extent for Pakistan is that Saudi Arabia’s cabinet has recently authorized one of the representatives of the General Audit Bureau to engage Pakistan to work out a memorandum of understanding (MoU) on accounting, supervisory and other professional financial matters. It is significant mainly because it shows the intent of the Kingdom; that it wants more investment in Pakistan.

Both countries have long enjoyed brotherly and friendly relations. Since the commencement of Pakistan’s formal diplomatic relations with the Kingdom in 1951, Saudi Arabia has extended significant assistance to Pakistan during the 80’s and the late 90’s, especially when the country become a nuclear state and otherwise faced sanctions and isolation at the international level. 

At that critical point, Saudi Arabia provided oil on deferred payments to Islamabad for five years. Then in 2008, during the time of the international financial crunch, Saudi Arabia deposited cash in Pakistan’s central bank and again gave the facility of deferred oil supply. From 2014-2015, amid the surge in oil prices, the Kingdom again came to the rescue of its friendly country and gave $1.5bn in assistance. Saudi Arabia has entertained Pakistan’s requests multiple times to rollover its cash deposits in Pakistan’s accounts.

Today, as a brotherly country, Saudi Arabia wants to see Pakistan as a stable state. It expects Islamabad to share some tangible evidence and data with Saudi authorities to confirm that it is on the path of recovery. Saudi officials and investors now want to engage with Pakistan on long-term projects. 

The Saudi ambassador in Pakistan is personally making the efforts to ensure such engagements and is optimistic that both states will chalk out a detailed investment plan including the construction of an oil refinery worth $10 billion in Gwadar. He has recently facilitated visits of Saudi investors to Pakistan as well.

Realising an urgent need for reforms to attract Saudi investment in Pakistan, the government has initiated numerous measures to improve governance and facilitate businessmen through one-window operations. Different teams in the Prime Minister’s office in Islamabad have been working day and night to remove hurdles in investment and explore potential and viable areas for investors.

I am certain Pakistan and Saudi Arabia will be entering a new era of mutual investments and sustainable development soon, leaving behind the troublesome legacy of loans and financial assistance to cover Islamabad’s chronic balance of payments needs. Top government officials here believe numerous projects and sectors including energy, IT and agriculture will be ready for Saudi investment before the expected visit of Crown Prince Mohammed bin Salman.

– The writer is a senior academic with an interest in Middle Eastern studies and political economy.