Middle Eastern companies are sitting on a potential goldmine if they can tighten up their working capital management. That’s the takeaway from PwC’s recent analysis which suggests that improving this efficiency could unlock a staggering $54.7 billion.
The 2025 Middle East’s Working Capital Study by PwC found that firms in the region freed up significant liquidity last year. They improved net working capital (NWC) days by six, achieving a 5.6% gain. Yet, despite these strides, the challenge of maintaining long-term efficiency remains formidable. Only 9.4% of companies have managed to maintain improvements consistently over the past few years. It’s a scenario that suggests many firms are fighting to keep up with the basics rather than consistently pushing forward.
Non-oil sectors have been the champions of growth, driving a 6.3% year-on-year revenue increase in 2024. The UAE led with a notable 16.8% rise in non-oil revenue, followed by Saudi Arabia’s 8.0% bump, underscoring a significant pivot towards diversifying the region’s earnings streams away from the perennial crutch of oil. This diversification has been bolstered by a robust pipeline of IPOs and vibrant M&A activity, painting a picture of a region keen on economic sophistication and resilience.
Yet, all that glitters is not gold. The region has seen a heavy reliance on short-term borrowing, which ballooned by nearly 24% last year, pushing interest expenses to hover uncomfortably at 3.1% of revenue. It’s a reality check that highlights the unsustainable nature of a quick-fix reliance on debt, despite overall EBITDA margins experiencing a slight lift.
PwC’s Mo Farzadi highlights the importance of a disciplined approach to cash management. Against a backdrop of geopolitical tensions and supply chain disruptions, firms that master their cash conversion cycles can transform potential liquidity into actual strategic advantage. By doing so, they not only fortify against market pressures but also set the stage for sustainable long-term growth.
PwC recommends a five-step roadmap for companies aiming to sharpen their financial resilience in 2025. These include nailing the basics like invoicing and payment processes, linking strategic goals to operational metrics, and aligning technology with the real drivers of working capital. Importantly, fostering a cash culture is key—encouraging financial discipline across all levels of a business might be the secret sauce to freeing up internal capital and reducing dependency on external financing.
