Pakistan looks to UAE for trade deals, not loan debts

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• PM tweets about ‘departing from loans to building a resilient economy’
• Plans for alliances in agriculture, mining, tech and renewable energy
• Corrective measures must continue in order to secure investments

The UAE confirmed late on Wednesday it has deposited $1 billion in Pakistan’s central bank, a day after Saudi Arabia also transferred $2 billion.

In addition to direct funding, the Islamabad government is aiming to attract multi-billion dollar investments from the UAE and other Gulf countries to create millions of new jobs after struggling with economic woes since last year’s devastating floods.

In a tweet on Tuesday Pakistan Prime Minister Shehbaz Sharif said that the investment would be overseen by the Special Investment Facilitation Council.

He said that over the next four to five years there would be an investment of “approximately $40 billion” as part of what he described as a “second Green Revolution”.

“The future holds the promise of departing from loans to building a resilient economy, which stands on its internal strengths. Together, we will make it happen,” Sharif added.

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Arun Leslie John, chief market analyst at Century Financial, cautioned that obstacles linked to Pakistan’s economic woes may hinder potential opportunities, though. 

“Pakistan has been undergoing several struggles since last year on multiple fronts – political and economic,” he said. “It has high external debt levels, low FX reserves and high inflation.

“These substantial challenges must be addressed to steer the economy in the right direction.”

At the National Seminar on Agriculture & Food Security yesterday, I stressed the importance of revitalizing agriculture as a harbinger of the second Green Revolution. We have all along heard about high-sounding & lofty visions but without hard work, perseverance & diligence, they…

— Shehbaz Sharif (@CMShehbaz) July 11, 2023

Progressing bilateral trade

Prime Minister Sharif held a meeting in Islamabad in May with Emirati royal Sheikh Ahmed Dalmook Al Maktoum, whose private office includes a portfolio of companies with a focus on agriculture, infrastructure and energy.

Sheikh Ahmed said he planned to return to “give further momentum” to UAE investments in Pakistan, which is battling an acute balance of payments crisis and falling foreign exchange reserves following the flood disasters last year.

The UAE and Pakistan are looking to build on bilateral non-oil foreign trade which reached AED25.7 billion ($7 billion) in 2022, a 30 percent increase compared to the previous year. 

The UAE accounts for over 40 percent of Pakistan’s trade with Arab countries, with non-oil exports from the UAE to Pakistan valued at nearly AED4.8 billion while re-exports totalled AED10.6 billion.

The UAE hosts 1.7 million Pakistani nationals, the biggest diaspora after Indians.

Last week Dr Musadik Malik, Pakistan’s minister of state for petroleum, hinted in a television interview that the UAE has allocated $22 billion for future investments in the country, with the agriculture, mining and technology sectors the likely beneficiaries.

The UAE is Pakistan’s top regional and fifth-largest worldwide investment partner. 

As well as agriculture, the two countries plan to work together more closely in the emerging fields of fintech, IT, startups and renewable energy. 

The UAE signed a new agreement last week to cooperate on developing and investing in new renewable energy projects in Pakistan, whose population exceeds 233 million. 

The deal signing was witnessed by Dr Sultan Al Jaber, Cop28 president-designate and the UAE’s special envoy for climate change during a visit to Pakistan last week.

“We must build the energy system of the future while decarbonising the energy system of today. This includes tripling renewables and doubling both energy efficiency and hydrogen production,” said Al Jaber.

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Abu Dhabi Ports Group is the latest high-profile UAE-based entity to invest in Pakistan after signing a concession agreement with Karachi Port Trust last month.

Under the terms of the 50-year AD Ports agreement, a joint venture has been formed to undertake “significant” investments in infrastructure over the next 10 years, with the bulk of it planned for 2026. 

Dr Thani bin Ahmed Al Zeyoudi, minister of state for foreign trade, said AD Ports Group is “setting the stage” for greater cooperation between the UAE and Pakistan.

Captain Mohamed Juma Al Shamisi, managing director and group CEO of AD Ports Group, added that the agreement has the potential to “unlock a new chapter of growth and progress” for both the UAE and Pakistan.

In March Al Zeyoudi met Syed Naveed Qamar, federal minister for commerce of Pakistan, in Dubai to discuss opportunities across sectors including energy, telecommunications, information technology, financial services, insurance, construction, oil and natural gas.

In January Mubadala Energy also signed a deal with OMV Downstream and Pak-Arab Refinery Limited to explore opportunities in sustainable fuels and feedstock production in Pakistan.

The International Monetary Fund said on June 30 it has reached a staff-level pact with Pakistan on a $3 billion stand-by arrangement as it teeters on the brink of default. The deal is subject to approval by the IMF board later in July.

Century Financial analyst John said Pakistan has shown a willingness to honour its debts, as seen by the $1 billion international bond repayment in December. 

“These corrective measures must continue on a persistent basis to help instil a stable environment conducive to attracting foreign direct investment, generating forex inflows and strengthening cooperation with other countries,” he said.

In January, the UAE agreed to lend $1 billion to Pakistan and roll over an existing $2 billion loan.