The Middle East’s corporate landscape is showing signs of steady growth and improved financial discipline. According to PwC’s latest Working Capital Study, regional companies saw revenues climb 6.3% in 2024, driven by expansion across non-oil sectors and renewed investment momentum.
Yet beneath the surface of this growth lies a persistent challenge: $54.7 billion in trapped capital—funds locked within companies’ balance sheets that could otherwise be fueling expansion, innovation, and shareholder value.
The Paradox of Growth
While the top line is expanding, many Middle Eastern firms remain constrained by inefficiencies in working capital. The study notes that the average net working capital (NWC) cycle across the region stands at 101.7 days, an improvement of six days compared to last year.
This progress, however, is fragile. Few companies have demonstrated the ability to sustain working capital efficiency year over year. In fact, only 9.4% of firms have consistently improved their NWC over a three-year period—highlighting that many still view it as a short-term fix rather than a long-term strategic priority.
Debt Pressure Mounts
Adding to the complexity, short-term debt among Middle Eastern corporates rose sharply by 23.8%, the fastest pace in recent years. As a result, interest costs have reached a five-year high, cutting into profitability despite a modest rise in earnings before interest, tax, depreciation, and amortization (EBITDA).
The combination of higher borrowing costs and rising operating expenses has placed renewed emphasis on liquidity management. For many CFOs, the real challenge is no longer revenue growth—it’s how effectively they can turn that growth into free cash flow.
Structural Bottlenecks
A significant portion of the region’s trapped cash is tied to delayed receivables, excessive inventory, and extended supplier payments. These factors indicate a lack of alignment between operational performance and financial strategy.
Some businesses have turned to stop-gap measures such as receivables factoring to free up cash. However, experts caution that while these tools may offer short-term relief, they do not address the underlying inefficiencies causing cash flow strain.
In many cases, companies that appear healthy on paper are actually carrying hidden liquidity risks, leaving them vulnerable to shifts in interest rates or sudden drops in demand.
Opportunities in Optimization
The path to unlocking trapped capital lies in a more strategic approach to working capital management. PwC’s findings suggest that even incremental improvements can generate significant impact. For example, a five-day reduction in the average NWC cycle across the region could release billions of dollars back into circulation—funds that could be reinvested in innovation, technology, or regional expansion.
Key areas of focus include:
- Streamlined Invoicing and Collection Processes
- Companies can accelerate cash inflows by adopting automated billing systems and enforcing timely collections policies.
- Smarter Inventory Management
- Predictive analytics and demand forecasting tools can help reduce excess stock without compromising service levels.
- Supplier Collaboration
- Engaging suppliers in transparent payment term discussions can balance liquidity needs on both sides, creating mutual value.
- Technology-Driven Transparency
- Using AI-enabled dashboards allows finance teams to visualize cash flow patterns and identify bottlenecks in real time.
- Performance Accountability
- Embedding working capital KPIs into executive scorecards ensures accountability and consistent focus across departments.
The Strategic Imperative for 2025
As the region moves into 2025, the message is clear: working capital efficiency is not just a financial metric—it’s a measure of strategic agility.
With economic diversification accelerating and global headwinds persisting, companies that can free up internal liquidity will have a decisive advantage. Whether funding acquisitions, driving sustainability projects, or investing in digital transformation, access to internal cash can make the difference between seizing opportunities and missing them.
The Middle East’s growth story is no longer defined solely by oil revenues. The rise of non-oil sectors—real estate, construction, logistics, technology, and retail—is reshaping the region’s financial DNA. But sustainable growth will depend on how effectively companies can manage their balance sheets and maintain healthy liquidity amid evolving market conditions.
Looking Ahead
The PwC report underscores an important shift: financial resilience is becoming the cornerstone of regional competitiveness. Unlocking the $54.7 billion currently tied up within corporate systems is not just a question of efficiency—it’s about empowering the next phase of transformation.
Middle Eastern firms that view working capital optimization as a strategic priority, rather than a periodic clean-up exercise, will be the ones best positioned to capture long-term value.
The region’s economic narrative is one of progress, diversification, and resilience—but unlocking trapped cash may well be the missing link that turns momentum into measurable, lasting growth.