Saudi Arabia pledges over $6 billion for Pakistan's struggling economy

Pakistan, facing economic difficulties, is looking to secure significant international financing for the fiscal year 2025-26. The country has revealed its intention to raise over $20 billion from various international lenders to help stabilize its economy and bolster its depleting reserves. Among its key financial supporters, Saudi Arabia has been identified as the largest source of external financing for Pakistan, projected to provide more than $6 billion. This support is instrumental as the South Asian nation prepares to start its new fiscal year on July 1, 2025, amidst existing economic challenges. According to official budget documents released this week, the anticipated support from Saudi Arabia encompasses a variety of financial instruments. Of the $6.46 billion expected from Riyadh, $5 billion will be allocated as time deposits, $1 billion will be for oil on deferred payments, and approximately $46.4 million is designated for economic assistance. This financial backing is crucial for Pakistan as it budgets Rs5.78 trillion (equivalent to about $20.4 billion) for foreign assistance, including loans and grants from both bilateral and multilateral partners. Notably, the reliance on Saudi Arabia extends beyond this financial support. The Pakistan Economic Survey 2024-25 highlighted the critical role of remittances sent by Pakistani nationals working abroad, particularly in Saudi Arabia, which accounted for about $7.4 billion in remittances last year. This figure represents approximately 25 percent of the country’s total remittances, underlining Saudi Arabia's significance in both direct financial assistance and as a source of income for many families in Pakistan. Analysts and economists have pointed out that Saudi Arabia's support is not merely about financial aid; it is also crucial for maintaining political ties and ensuring regional stability. As Pakistan navigates through turbulent economic waters, the relationship with Saudi Arabia remains vital for securing additional investments and support from other global financial entities. Understanding the dynamics of this relationship is important for comprehending the larger picture of Pakistan’s economic strategy and its reliance on foreign investments to uplift its economy in the coming years.