Islamabad: Saudi Arabia and Pakistan have signed memorandums of understanding in the energy and agriculture sectors, including one for a $10 billion (Dh36.73 billion) oil refinery in southwestern city of Gwadar, where China has helped build a deep water port. Saudi Arabia also signed a pact to provide Pakistan with crude oil and petroleum products on delayed payments to meets its energy needs. Saudi Arabia on Sunday said plans to invest $20 billion in Pakistan as he began a swing through Asia at a time when Saudi Arabia’s ties with the West have waned.
Saudi Crown Prince Mohammed Bin Salman gave no time frame for the $20 billion in projects, which would dwarf the roughly $53 million Saudi Arabia has invested in Pakistan in the last three years. Investors appeared sceptical: The benchmark Karachi Stock Exchange 100 Index fell on Monday to the lowest in about three weeks.
The Crown Prince’s stop in Pakistan is the first leg of a broader Asia trip that will also take him to India, South Korea and China, where he’s scheduled to meet with President Xi Jinping. He plans to head to India on Tuesday after postponing his trips to Indonesia and Malaysia.
Prince Salman’s investment plans may assist Khan’s efforts to revive an economy hurt by widening current account and fiscal deficits. They may also help Pakistan become less reliant on China, which is investing about $60 billion in the so-called China-Pakistan Economic Corridor. China is Pakistan’s largest trading partner followed by the UAE, the US and Saudi Arabia.
Saudi Arabia has already given a $3 billion loan to Pakistan, while the United Arab Emirates provided another $1 billion to help South Asia’s second biggest economy avert a financial crisis. Finance Minister Asad Umar said this month the nation is close to signing a bailout package with the International Monetary Fund to boost dwindling foreign reserves.
The Saudi “investment and infrastructure projects should provide a welcome supply-side boost” to the economy, said Bilal Khan, a senior economist at Standard Chartered Plc in Dubai. However, “addressing the country’s twin deficits will require fiscal and monetary policy action, likely under an IMF program.”
While the two countries have been long-time staunch allies, relations took a hit four years ago after Pakistan refused a Saudi request for support in the Yemen conflict. Saudi Arabia has also long been accused of funding and spreading extremist Islamic ideology across Pakistan.
Khan was one of the few prominent foreign dignitaries who attended the Future Investment Initiative in Riyadh last year after it emerged that Washington Post columnist Jamal Khashoggi, a Saudi critic, was killed inside the kingdom’s consulate in Istanbul. Pakistan publicly supported Saudi Arabia amid a swell of global outrage.
Now Prince Salman is visiting Islamabad and New Delhi at a time of renewed tensions between nuclear-armed rivals India and Pakistan. More than Indian paramilitary personnel died during an attack in the disputed region of Kashmir last week. India has pointed the finger at Pakistan, which denies involvement.