KARACHI: Pakistan’s recent defense pact with Saudi Arabia can help Islamabad stabilize its economy via increased jobs, sharing of technology and exports to the Kingdom, defense and economic experts said on Thursday.
Pakistan and Saudi Arabia on Wednesday signed a “Strategic Mutual Defense Agreement” pledging that aggression against one country would be treated as an attack on both, a move that will enhance joint deterrence and strengthen decades of military and security cooperation. The accord comes at a time of extreme volatility in the Middle East, where prolonged conflicts have heightened fears of wider instability, reinforcing the urgency Gulf states place on stronger security and defense partnerships.
It also takes place as Pakistan looks to escape a prolonged macroeconomic crisis that forced it to secure loan packages from the International Monetary Fund (IMF). Saudi Arabia has bailed Pakistan out of financial troubles over the years, extending loans to the South Asian country and providing it oil against deferred payments.
Mushahid Hussain Syed, former chairperson of the Senate Standing Committee on Defense, noted that enhanced defense ties between the two allies could have positive implications for Pakistan’s economy.
“Yes, both Muslim brotherly countries are leveraging their respective strengths in this historic pact: Pakistan’s military capability and Saudi Arabia’s economic strength,” Syed told Arab News.
Prime Minister Shehbaz Sharif has attempted to increase Pakistan’s GDP and sought help from IMF loans to keep Pakistan’s fragile economy afloat. Pakistan, which exported goods and services worth $32 billion last fiscal year, holds an exhibition in Karachi every two years to increase its defense and military exports.
The JF-17 Thunder, a multi-role fighter jet co-developed by Pakistan and China, is one such fighter jet that was showcased in the exhibition last year.
Syed said it was likely the Kingdom could buy the fighter jets from Pakistan.
“Saudi Arabia has close ties with China so JF-17 Thunder sales can also be on the agenda, given the triangular Pakistan-KSA-China partnership,” Syed said.
Asked if Pakistan could expect some economic relief from the Kingdom in the form of deferred oil payments and loans going forward, Syed said it “should be expected.”
“KSA has helped out Pakistan economically in the past,” he said.
Khurram Schehzad, adviser to Pakistan’s finance minister, did not respond to Arab News’ queries.
’FERTILE LAND, LABOR AND REMITTANCES’
Khaqan Najeeb, former finance adviser to Pakistan’s finance ministry, said the pact had formalized decades of ties and opened space for deeper trade and investment between Pakistan and Saudi Arabia.
“For Saudi Arabia, Pakistan offers fertile land, skilled labor and potential food security links,” Najeeb noted. “For Pakistan, Riyadh is its top remittance source and a critical investor,” he added.
He said the defense agreement is in line with Saudi Arabia’s Vision 2030 program and gives Pakistan a chance to stabilize its economy “through jobs, capital, and technology.”
Asked if Pakistan was expected to receive an investment pledge from Saudi Arabia, similar to the US which had secured a pledge of $600 million from the Kingdom earlier this year, Najeeb pointed out that Islamabad and Riyadh had signed agreements worth $2.8 billion in October 2024.
The finance expert, however, warned that transforming those agreements into “real projects” was a challenge for Pakistan amid the country’s regulatory and fiscal strains.
“Effective follow-throughs can move the relationship beyond short-term bailouts toward a durable, security-backed economic partnership,” Najeeb noted.
PAKISTAN STOCKS RALLY
Buoyed by the defense pact, investor confidence surged in Pakistan’s stock market during trading on Thursday. Pakistan’s benchmark KSE-100 Index rose by over one percent and closed at a record 157,953 points, with analysts attributing the rally to Wednesday’s pact.
“The market touched all-time high after Pak-Saudi pact which is likely to ease (Islamabad’s) financial burden as Pak-Saudi relations improve,” Ahsan Mehanti, CEO at Arif Habib Commodities, told Arab News.
He said investors were expecting Pakistan to receive economic support from Saudi Arabia following the pact.
Leading brokerage house Topline Securities agreed.
“The bulls stampeded across the trading floor today as the local bourse surged on the back of a landmark development— the signing of the Strategic Mutual Defense Agreement (SMDA) between Saudi Arabia and Pakistan,” Topline Securities said in a statement.
