Saudi Arabia boosts Pakistan’s energy and financial resilience
Saudi Arabia has pledged a $1 billion oil financing facility to Pakistan for the current 2025–26 fiscal year, alongside rolling over $5 billion in deposits with the State Bank of Pakistan. The announcements, confirmed by Pakistani finance ministry officials, underscore Riyadh’s continued support for Pakistan’s energy needs and external balance amid ongoing fiscal challenges.
The $1 billion oil facility is expected to help Pakistan cover its energy import requirements and relieve pressure on the country’s foreign exchange reserves. Officials indicated that the facility will provide roughly $100 million per month, totaling about Rs28.37 billion in local currency, with first-quarter activity already reflecting roughly Rs85 billion worth of oil supplies under the facility (approximately $300 million).
In addition to the oil facility, Saudi Arabia has renewed time deposits totaling $5 billion held with the State Bank of Pakistan. Of this amount, $2 billion is due in December and $3 billion in June 2026. The deposits carry a 4% annual interest rate and have historically been renewed year after year to buttress Pakistan’s external account.
Officials framed the renewals as a demonstration of Riyadh’s steadfast economic backing, noting that the facilities’ continuity aligns with broader bilateral ties and regional stability. The Saudi support is appearing at a time when Pakistan seeks to shore up reserves and maintain economic momentum amid persistent fiscal constraints.
High-level visits and strategic alignment
The fresh financial assurances come as Prime Minister Shehbaz Sharif arrived in Riyadh for a three-day visit, during which he is set to participate in the 9th edition of the Future Investment Initiative. The trip follows Pakistan’s recent signing of a landmark Strategic Mutual Defence Agreement with Saudi Arabia, which states that aggression against either country will be considered aggression against both.
The defence pact, signed during Sharif’s visit to Riyadh at the invitation of Crown Prince and Prime Minister Mohammed bin Salman, signals a deepening of security and strategic cooperation between the two nations. Observers say the accord adds weight to Saudi commitments in diplomacy, security, and economic engagement with Pakistan at a time of evolving regional dynamics.
Pakistan-Saudi economic framework and broader cooperation
Pakistan has formed an 18-member high-level committee to lead economic negotiations under the Pakistan–Saudi Arabia Economic Framework, reflecting the government’s push to broaden cooperation beyond defence and energy. The committee is tasked with supervising discussions aimed at expanding collaboration into environmental protection and climate stability, signaling a holistic approach to bilateral relations.
Analysts note that Saudi financial support—both through the oil facility and the renewal of deposits—helps Pakistan manage import bills and support its external accounts. While the arrangements are primarily financial mechanisms, they sit within a broader strategy of closer economic and strategic alignment with Saudi Arabia, especially as Pakistan seeks stability in its macroeconomic indicators and investment climate.
Implications for Pakistan’s economy and regional balance
For Pakistan, the oil facility offers a predictable source of energy financing that can ease import pressures and stabilise monthly liquidity. The ongoing renewals of deposits reinforce the kaliedoscopic mix of aid, investment, and strategic ties that Islamabad has cultivated with Riyadh over the years.
Regionally, the Saudi-Pakistan rapprochement forms part of a broader pattern of Gulf states deepening partnerships with South Asian economies. The defence pact and economic commitments together create space for Pakistan to pursue reforms, attract investment, and pursue climate and energy transition initiatives with Saudi involvement.
As the two countries coordinate under the new framework, observers will watch for further details on how the oil facility and deposits interact with Pakistan’s broader macroeconomic program, including fiscal consolidation, energy policy, and exchange rate management. The coming months will reveal whether these moves translate into sustained macro stability and a more predictable investment climate.
