Pakistan and Saudi Arabia are in advanced discussions to convert roughly USD 2 billion in existing Saudi financial loans into a defence procurement agreement centred on the JF-17 Thunder fighter jet, according to two Pakistani sources cited by Reuters. The negotiations signal a deepening of military cooperation between the two countries following the signing of a mutual defence pact last year, and come at a time when both sides are recalibrating their strategic priorities amid regional and economic pressures.
The talks are seen as an effort to translate political and strategic commitments into concrete military arrangements. Pakistan is facing sustained financial strain and is looking for innovative ways to manage external obligations, while Saudi Arabia is seeking to bolster its defence posture as US policies in the Middle East evolve. Converting debt into defence procurement would allow both sides to advance their respective objectives without immediate cash outflows.
According to Reuters, the discussions have so far focused specifically on the supply of JF-17 Thunder fighter jets, a lightweight multirole combat aircraft jointly developed by Pakistan and China and manufactured domestically in Pakistan. One source familiar with the talks said that while multiple options were initially considered, the JF-17 has emerged as the primary and most viable choice. The total value of the proposed arrangement is estimated at around USD 4 billion, with the loan conversion covering approximately half of that amount and an additional USD 2 billion earmarked for related equipment and systems.
High-level military engagement has accompanied the negotiations. Pakistan’s Air Chief Marshal Zaheer Ahmed Baber Sidhu recently visited Saudi Arabia, where he held discussions with his Saudi counterpart on bilateral defence cooperation, the regional security environment, and future avenues for collaboration. Pakistan’s military said the visit was aimed at strengthening institutional ties and advancing shared strategic interests.
The backdrop to these talks is a mutual defence pact signed by Pakistan and Saudi Arabia in September, under which both countries agreed to treat aggression against either as an attack on both. The agreement marked a significant expansion of an already long-standing security relationship and was concluded in a period of heightened regional tension following Israeli strikes on what it described as Hamas-linked targets in Doha, developments that unsettled the broader Gulf region.
Pakistan and Saudi Arabia have a long history of defence and financial cooperation. Islamabad has provided military training, advisory support, and personnel to the kingdom over several decades, while Riyadh has repeatedly stepped in with financial assistance during Pakistan’s economic crises. In 2018, Saudi Arabia announced a USD 6 billion support package for Pakistan, split evenly between a central bank deposit and oil supplies provided on deferred payment terms.
Saudi Arabia has since rolled over parts of these deposits multiple times, including a USD 1.2 billion deferment last year. These measures have helped Pakistan stabilise its foreign exchange reserves amid chronic balance-of-payments pressures. Pakistan is currently operating under a USD 7 billion programme with the International Monetary Fund, its 24th such arrangement, which followed a short-term USD 3 billion bailout in 2023 that helped avert a sovereign default. Financial rollovers from Saudi Arabia and other Gulf partners were a key condition for securing IMF support.
At the same time, Pakistan has been actively expanding its defence outreach as part of a broader strategy to boost arms exports and leverage its domestic defence industry for economic benefit. Last month, Islamabad concluded a weapons deal worth more than USD 4 billion with Libya’s eastern-based Libyan National Army, one of the largest arms sales in Pakistan’s history. That agreement reportedly includes JF-17 fighter jets as well as training aircraft.
Pakistan has also held preliminary discussions with Bangladesh regarding the possible sale of JF-17s, signalling its intention to widen its defence export footprint beyond South Asia and the Middle East. According to Reuters, retired Air Marshal and defence analyst Aamir Masood said Pakistan was either negotiating or had finalised defence-related deals with around six countries, covering aircraft, electronic systems, and weapons packages associated with the JF-17. While he confirmed Saudi Arabia was among the countries in discussions, he declined to provide specific details.
The growing international interest in the JF-17 is attributed largely to its relatively low cost and its claimed combat experience. One source told Reuters that the aircraft’s appeal has increased because it is “tested and has been used in combat,” with Pakistan stating that the jet was deployed during last year’s conflict with India. Pakistani officials argue that this operational record, combined with affordability, makes the aircraft attractive to countries seeking capable but cost-effective air power.
The negotiations with Saudi Arabia are therefore part of a broader push by Islamabad to operationalise the defence cooperation outlined in the mutual defence pact and to monetise its defence manufacturing capabilities. Both countries have indicated a desire to deepen collaboration as regional dynamics shift and shared security concerns intensify.
Reflecting the optimism within Pakistan’s leadership, Defence Minister Khawaja Asif recently said that the success of Pakistan’s weapons industry could significantly improve the country’s economic outlook. Speaking to Geo News, he claimed that strong demand for Pakistani-made aircraft could reduce the country’s reliance on the IMF within months.
As defence exports gather momentum, Pakistani officials continue to point to the JF-17’s combat credentials and cost-effectiveness as key drivers of international demand. The ongoing talks with Saudi Arabia, combined with recent agreements with other countries, underscore Pakistan’s efforts to turn defence production into a strategic economic asset while reinforcing long-standing partnerships in an increasingly complex geopolitical environment.
