In the upcoming visit of the Saudi Crown Prince, Mohammad bin Salman, Pakistan is likely to sign multiple MoU’s worth at least $10 to $12 billion.
The Board of Investment (BOI) Chairman Haroon Sharif told Dawn on Monday that, “three mega government-to-government MoUs will be signed and their total volume will be in the double digits”.
One such project for which the MoUs will be signed is, to set up an oil refinery at Gwadar; in regard to which Sharif said that the cost will be around $8 billion. Sharif also added that the Saudi investment deal could see an establishment of a petrochemical complex which will call for investments of billions more, however, the petrochemical investment is still tentative and remains at the discretion of the Saudis. The exact area where the Saudis will install the refinery will be determined at a later date and after the feasibility study.
Prince Mohammad bin Salman, will not only arrive in Pakistan to talk about the MoUs, but will also be accompanied by 40 Saudi businessmen who will meet top local businessmen for a series of talks, and it is expected that other legal agreements may also be signed during their visit.
This is to be a follow up meeting to the one that PM Khan and the Saudi Crown Prince had last year, where the Saudis granted a $6 billion lifeline to Pakistan.
Significance of the visit
Mohammad bin Salman will also be the very first state guest to stay at the PM house, which is an unprecedented and sudden move as the estate has always been reserved exclusively for the PM.
The multi-billion dollar projects may bring job opportunities to the regions where they are taking place, and this may help curb the issue of unemployment, within those regions.
It seems as though in the recent past many wary eyes have been locked on to the visions of financial, geopolitical and economic gain that Pakistan’s geographical location has to offer. In the past couple of years, we have seen that China is extremely keen on the CPEC projects and that Pakistan has become a hub for many wealthy countries to invest in, especially areas like Gwadar which provide great economic prospects.
Although it may seem that the Pakistani economy will benefit, which it will in the short-term, there may be a possibility that in the long-term Pakistan may end up suffering. This could happen due to Foreign Direct Investment and reduction in unemployment as a result of these mega-projects in the specific regions. The current account deficit that Pakistan faced at the end of the last year was the worst in the country’s history, due to which the Balance of Payments (BoP) were also affected.
With regards to the BoP, which records one country’s transactions with the rest of the world, if policy makers and government officials stay on the current path of accepting and administering huge amounts of investments from countries like China and Saudi Arabia, in the long run Pakistan will witness a period where preposterous amounts of expenditures will have to be made in terms of interest payments and paying back debts. This will result in the BoP suffering even more so than it did over the last fiscal year.
Also there is no point in denying that countries like Saudi Arabia and China would simply loan Pakistan exuberant amounts of money for development and then not ask for return when their interests are met.
In foresight, maybe the policy makers and administrators know exactly what they are doing and that the road to economic development is a top priority for them.