Clearing the Noise Around the Fauji-UAE Deal

Over the weekend, Pakistan’s Deputy Prime Minister, often described as the financial czar of the ruling Pakistan Muslim League (N), suggested that the UAE is acquiring a stake in Fauji Foundation in exchange for USD1 billion currently parked with the State Bank of Pakistan. The statement immediately triggered speculation in the market. The dominant perception became that Fauji Foundation was preparing to offload a large portion of its holdings in listed companies, particularly Fauji Fertilizer Company and Mari Energies.

That perception, however, is misplaced.

Fauji Foundation owns roughly 40% of Mari Energies and about 45% of Fauji Fertilizer Company. Selling anything close to half of these stakes would materially dilute its ownership and potentially weaken control. People close to these businesses indicate that the structure being discussed is very different from the impression created by public remarks. It also raises a fair question. In what capacity is a government official speaking on behalf of a non-government group?

What appears to be taking shape is a USD1 billion investment commitment by the UAE into Fauji Foundation. Importantly, this is not fresh foreign inflow in the conventional sense. The USD1 billion already sits with SBP as deposits. Those deposits would be converted into equity investment in Fauji Foundation. As a result, SBP’s gross reserves would remain unchanged, but Pakistan’s external liabilities would decline by USD1 billion while recorded foreign direct investment would rise by the same amount.

Operationally, SBP would create the rupee counterpart, roughly PKR 280 billion, and transfer it to Fauji Foundation. A new fund or trust would be established, structured as a joint partnership. The UAE side would contribute its share in cash, representing the USD1 billion, while Fauji Foundation would contribute assets of equivalent value. Market chatter suggests these could include stakes in Fauji Fertilizer, Askari Bank, Fauji Cement and other businesses, though Mari Energies is reportedly excluded. The expectation is that this fund would primarily channel capital into new projects, likely across agriculture, energy, and mining.

If executed properly, this would be one of the largest foreign investments Pakistan has seen in years and should be welcomed. From a geopolitical lens, Pakistan’s engagement with the United Arab Emirates is clearly deepening, while the much-publicised wave of Saudi investment has yet to fully materialise.

That said, the broader picture remains troubling. There is little evidence of a coherent investment strategy. The UAE’s acquisition of a small local bank brought control but negligible capital. Control of a seaport terminal changed hands, yet the operator is now seeking financing from domestic banks rather than bringing in foreign money. The Islamabad Airport transaction has lost momentum. Now we have a trust-based investment in Fauji Foundation.

The pattern suggests urgency rather than strategy. Pakistan appears willing to accept capital in any form, without a clearly articulated framework or long-term plan. Still, despite the structural ambiguities and execution risks, a USD1 billion investment, however structured, will understandably be celebrated in today’s environment.

And perhaps that alone explains the enthusiasm.