Arabon dollars from Arab countries - Will it help Pakistan?

August 11, 2023 (MLN): Accelerated person results are being seen on foreign investments, specifically from friendly Arab countries. Outgoing government also green-lighted additional terminals in Karachi to UAE's AD Ports. Executions are being done at lightning space. 

Saudi Arabia also seems to be eyeing a pie of Reko Diq copper and gold mines. Govt may end up receding its equity to settle for allocating a stake to KSA. This is after the mega USD 10B refinery announcement in which the Chinese may eventually be involved. 

The flurry of investments will very well continue in the caretaker government to ensure momentum is on the upward journey. No month is going to be wasted it seems to pour FDI in. Our Islamabad airport's management might also be handing keys to Qatari investors. 

What's propelling the current surge is not extremely lofty valuations or premium asset growth but the deepening of eco-political ties. Arab friends too appear dismayed at loan requests but happy to pour investments in distressed assets. It may be a win-win got both parties if not an ideal outcome. 

True hardcore challenges remain outstanding. Until PIA, Railways, and Discos are not handed to the private sector, the bleeding will not stop. That is where the real impetus is required and true success looks like. At such elevated debt levels, Pakistan wants usd 20-30B FDI in the 2020s to deleverage risks and become sustainable. 

Starting with low-hanging fruits and vegetables is fine. But be mindful of giving free lunches and beware of eventual profit repatriation. Growing with domestic resources is always better unless there is technology transfer. Open carefully.

The author is an independent economic analyst and writes on Twitter and Linkedin.