Amid escalating West Asia tensions, Pakistan faces a dual crisis—economic fragility and strategic vulnerability. Reliance on Gulf aid and internal structural weaknesses threaten both national stability and citizens’ livelihoods.

Amid the escalating conflict in West Asia, Pakistan’s Prime Minister, Shehbaz Sharif, visited Saudi Arabia in early March 2026 on an official invitation from Crown Prince Mohammed bin Salman. The visit came months after Pakistan and Saudi Arabia signed a Strategic Mutual Defence Agreement in September 2025, under which both countries pledged to treat any aggression against one as aggression against both. The agreement has gained renewed significance amid rising regional tensions, particularly following multiple drone and missile strikes by Iran targeting Gulf states. Saudi Arabia, in particular, has faced direct attacks on both military and civilian infrastructure, including key oil facilities such as the Ras Tanura refinery, prompting Riyadh to strengthen its air defenses and condemn the strikes as violations of international law.

Pakistan’s engagement with Saudi Arabia was expected to focus primarily on regional security coordination and strategic cooperation. However, despite the gravity of the security situation, Pakistan’s leadership prioritized pressing for economic support and financial assistance from Riyadh—highlighting Islamabad’s acute reliance on Gulf aid and energy support. This approach underscores the structural fragility of Pakistan’s economy, which remains heavily dependent on external financing from the United States, China, and Gulf countries. Pakistan’s economic vulnerability increasingly shapes its foreign policy, compelling its leadership to prioritize financial survival even amid serious regional security crises.

Securitizing the remittances

In pursuit of immediate financial relief, Pakistan reportedly submitted eight economic cooperation requests to Saudi Arabia. These included converting $5 billion in Saudi deposits into a ten-year long-term facility to secure stable financing, expanding Saudi deferred oil credit from approximately $1.2 billion to $5 billion with extended repayment terms, and proposals to securitize nearly $10 billion in remittances sent by Pakistani workers abroad. Other requests encompassed investment initiatives, bank guarantees, and support related to Pakistan’s ongoing program review with the International Monetary Fund (IMF).

Most troubling among these proposals was the suggestion to use remittances of Pakistani migrant workers as collateral for state borrowing. Such an arrangement could allow Saudi authorities to recover debts directly from the salaries of workers abroad if loans were not repaid. This effectively shifts the burden of fiscal mismanagement onto some of the country’s most vulnerable citizens—low-income laborers working under difficult conditions abroad to support their families. Treating migrant workers’ earnings as collateral for sovereign debt is unprecedented and ethically concerning, reflecting the depth of Pakistan’s economic desperation.

Pakistan’s Widening Inequality and Rising Social Unrest

The domestic economic situation is equally severe. Rising oil prices due to the Iran crisis prompted Shehbaz Sharif to announce austerity measures reminiscent of the COVID-19 era. Universities were shut, fuel prices surged—petrol rose by PKR 55 per litre to PKR 321 (~11.5¢ USD), and diesel reached PKR 335, the highest since independence. Inflation jumped to around 7% in February 2026 from 5.8% in January, while GDP growth remained low and employment opportunities scarce.

Despite widespread hardships, Pakistan’s elite continued to enjoy luxuries. Reports indicate that the Punjab provincial government is acquiring a Gulfstream jet worth $38–42 million USD for VIP use, while ministerial and adviser salaries were increased. The 2025–26 federal budget raised allocations for the Prime Minister’s House from Rs 72 crore to Rs 86 crore, with additional funds for vehicles and official facilities. Some officials reportedly plan luxury vehicle purchases, including Mercedes cars, highlighting the stark divide between the ruling elite and ordinary citizens. Pakistani political scientist Syed Mohammad Ali noted, “The rich can still live luxurious lives in poorer countries, but the situation for the poor masses is becoming increasingly intolerable. Such is the situation in Pakistan today.”

Structural challenges exacerbate Pakistan’s precarious situation. Many companies are leaving the country, foreign direct investment has fallen sharply—FDI declined nearly 45% year-on-year in February 2026—and repeated IMF bailout packages have failed to produce meaningful reforms. Multinational corporations such as Procter & Gamble, Eli Lilly, Shell, Microsoft, Uber, and Yamaha have either wound down operations, divested assets, or exited Pakistan entirely due to high operating costs, policy uncertainty, and an unfavourable business climate. Former Finance Minister Miftah Ismail acknowledged, “Pakistan remains trapped in an economic cycle due to structural governance issues.” Military ownership of key businesses and the influence of feudal elites hinder structural reform, keeping Pakistan dependent on external aid. Meanwhile, ordinary citizens face rising costs, shrinking opportunities, and growing uncertainty about their livelihoods.

Social unrest is also on the rise. Reports by the Foreign Affairs Ministry of Denmark and the International Organization for Migration (IOM) suggest that around 40% of Pakistanis express a desire to emigrate due to economic hardship, political instability, unemployment, high inflation, and limited opportunities. An Ipsos Pakistan survey found that while 74% of young adults (18–34) wish to stay and contribute to national development, 26% would consider emigrating, often favoring destinations in the Middle East, such as Saudi Arabia and Dubai. Educated urban youth, in particular, cite economic stagnation, lack of jobs, and the search for better income, respect, and stability as motivating factors.

Geopolitics Meets Economic Fragility

The mutual defense pact with Saudi Arabia carries strategic risks. To prevent escalation, Pakistan has been attempting to persuade Iran to halt attacks on Saudi Arabia. Nevertheless, under mounting pressure, the country recently deployed naval ships to the Strait of Hormuz under Operation “Muhafiz‑ul‑Bahr” (Protector of the Seas) to escort and protect merchant vessels. While Islamabad maintains that the operation is defensive and focused on maritime security, it exposes Pakistan to potential retaliation from Iran, increasing both internal and external vulnerabilities.

Sectarian tensions are already rising. On 1 March 2026, hundreds of mostly pro-Iran protesters gathered in Karachi and across Pakistan following the killing of Iran’s Supreme Leader Ayatollah Ali Khamenei in U.S.–Israeli strikes. Demonstrators condemned the attacks and accused the Pakistani government of siding with Washington. Protests turned violent, with attempts to storm the U.S. Consulate in Karachi resulting in 10–16 deaths and over 60 injuries, while nationwide demonstrations reportedly caused 26–35 deaths and over 120 injuries. These events further destabilize Pakistan, risking heightened sectarian violence at a time of severe geopolitical and economic strain. If the war ends soon, the situation may stabilize somewhat, but if the conflict continues, it will create further problems for Pakistan, both geopolitically and geoeconomically.

Recent reviews by the International Monetary Fund have repeatedly stressed the need for deeper fiscal discipline, structural reforms, and governance improvements in Pakistan’s economy, reflecting concerns about the sustainability of the country’s economic recovery and its reliance on external financial assistance. In its 2025 country report, the IMF highlighted that while short‑term stability has been achieved under the Extended Fund Facility, longstanding structural weaknesses, fiscal imbalances, and external vulnerabilities continue to weigh on Pakistan’s economic trajectory. The Fund emphasized that reforms must be institutionalized to durably address these issues rather than producing only temporary stabilization. It further underlined that sound macro‑fiscal policies, revenue mobilization, and strengthened governance frameworks are critical to reduce dependence on external financing and build a sustainable growth path.

However, deep structural problems make Pakistan’s recovery particularly difficult: the military dominates key industries and is unlikely to cede control, discouraging private investment. Society is deeply feudal, with entrenched feudal values and a nexus between landed elites and religious authorities, which perpetuates traditional power structures and resists modernization. The leadership is widely corrupt, more concerned with protecting personal wealth and enjoying retirement abroad than implementing reforms. As a result, the country is unlikely to follow IMF guidelines, and structural weaknesses—from governance failures to elite capture—remain unaddressed. Without investment, reforms, or accountable governance, Pakistan is trapped in a cycle of dependency, and its long-term economic future appears bleak.

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