For the struggling economy of Pakistan, foreign remittances from expatriates are lifesavers, and the United Arab Emirates (UAE) is country’s second-largest source of remittances. In the last five years, 1.3 million Pakistanis have found jobs in the UAE. In 2019 alone, Pakistani expatriates in UAE sent more than US$5 billion (A$6.725 billion) back home.

A changing geopolitical scenario, however, could result in the drying up of this source of financial support for Pakistan.

On 18 November, UAE banned the issue of work visas to Pakistanis, along with the nationals of a few other Muslim countries. Initially, Pakistan’s Foreign Office claimed the ban was due to Covid-19. However, India has more Covid-19 cases per capita than Pakistan, but no ban was imposed on visas for Indian nationals. A week later, it was revealed that the visa ban was due to security reasons and not Covid-19.

Political pundits quickly attributed the UAE decision to Pakistan’s latest foreign policy flip-flops, which have angered Gulf states.

UAE has made a calculated decision, most likely on the advice of Saudi Arabia, and will not reverse it merely on the request of Pakistani leadership.

UAE is a country essentially run by expatriates – out of a total population of 9.8 million, 90% are expatriates. Indians make up the largest foreign nationality in UAE, with a population of 2.6 million, followed by 1.2 million Pakistanis, 700,000 Bangladeshis, and over half a million Filipinos.

But now that new aspirants from Pakistan cannot get work visas for UAE, and many have already returned home due to the Covid-19 pandemic, the number of Pakistani expatriates in UAE will fall sharply.

What will Pakistan lose, economically? The second-largest source of its foreign remittances. In the month of October alone, before the visa ban, Pakistanis sent $504 million back home from UAE. At this average, Pakistan could have received foreign remittances of $6 billion from UAE in fiscal year 2020–21, which it now will not get.

These numbers are significant for Pakistan’s economy, because the total foreign exchange reserves of the country stand at over $20 billion. The current account deficit is $160 million and the balance of trade stands at a deficit of $17 billion. This means that Pakistan badly needs foreign currency to pay for its import bills, most notably oil.

Besides, Pakistan’s ailing economy has no employment opportunities for people who would otherwise have found work in the UAE. This will not only keep the unemployment rate high, but will also increase political pressure on Pakistan’s government to create jobs. Therefore, the UAE visa ban will cost Pakistan’s economy dearly.

Further adding salt to the wound is that jobs lost by Pakistan in UAE are apparently going to Indian nationals. Pakistani media has reported that one recruitment agency in Rawalpindi city alone lost 3000 jobs in UAE which were filled by its Indian competitor. This is just one case, and many such instances are expected in the coming months. Former Senator Enver Baig, who runs a recruitment agency, told the media that Pakistan is losing 800 to 1000 jobs per day in UAE, and India is benefitting from the loss.

Workers clean the exterior of the Museum of the Future in Dubai's financial district, 27 October 2020 (Karim Sahib/AFP via Getty Images)

So why has UAE banned the issue of work visas to a fellow Islamic country? The answer lies in the Pakistani government’s foreign policy decisions, which have irked the Gulf monarchies. Pakistan has aligned itself with the Turkey-Iran-Malaysia bloc in the Muslim world, which is challenging Saudi Arabia’s leadership. In December 2019, Saudi Arabia and its closest ally UAE strong-armed Pakistan out of the Kuala Lumpur Summit, organised by the Turkey-Iran-Malaysia bloc, using the threat of economic sanctions.

During the last 12 months, further rifts developed between Islamabad and the Gulf states, reaching their lowest point when Pakistan’s Foreign Minister strongly criticised Gulf states for not supporting Pakistan on the issue of Kashmir. Subsequently, Saudi Arabia demanded Pakistan repay its loans, cancelled investment commitments of $20 billion in Pakistan, and also asked its ally UAE to choke Pakistan economically by suspending work visas to its citizens.

This scenario has left Pakistan with limited options to salvage the situation. UAE rulers will soon be in Pakistan on their annual hunting trip. Pakistan’s government officials are under pressure to meet UAE rulers during their visit and request they suspend the visa ban.

Such a move is unlikely to work: UAE has made a calculated decision, most likely on the advice of Saudi Arabia, and will not reverse it merely on the request of Pakistani leadership.

This leaves Pakistan in the uncomfortable dilemma of recalibrating its foreign policy entirely – meaning it has to withdraw its support for the Turkey-Iran-Malaysia bloc. Pakistan’s government is finding out that it cannot make independent foreign policy decisions against countries on which it is economically dependent. The prudent approach would be to align itself diplomatically with countries from which it gets economic benefits (i.e., Gulf states), as opposed to the Turkey-Iran-Malaysia bloc, which has little to offer Pakistan’s economy.