The effects of oil glut have started to take a toll on oil-reliant economies. With oil prices in international markets at a historic low, the Middle-Eastern oil-reliant economies are facing the shocks. Since mid-2015, state-owned firms have laid off thousands of workers. With the glut projected to continue for a longer period than expected, Gulf’s wealthy oil states are preparing for lengthy spells of austerity. The United Arab Emirates (UAE), Saudi Arabia, Qatar and other countries in the region have curbed spending on construction projects and reduced energy subsidies to limit budget deficits. Most of the layoffs are in the energy and construction industries, as state-linked firms wish to ensure they don’t drain state finances in the wake of continued oil glut projections. But most of the layoffs in Abu Dhabi state firms are not in response to production cuts, as the UAE has not reduced its oil output. The UAE officials have stated that they are proceeding with long-planned oil and gas development projects. Nor do the layoffs mean Abu Dhabi is running out of money. With hundreds of billions of dollars in its sovereign wealth fund, the emirate could draw down its reserves to sustain current levels of spending for decades. But in all probability government wishes to minimise the speed of drawdown, as it looks ahead to the possibility of many years of low oil prices. Most cuts at state firms in Abu Dhabi and elsewhere involve foreign staff rather than locals because governments wish to limit unemployment among their citizens. Nevertheless, job losses are contributing to an economic slowdown in the region. The International Monetary Fund has predicted Abu Dhabi’s gross domestic product growth will fall to 1.7 percent this year from 4.4 percent in 2015. International workers working in the region face a tricky situation in the wake of these layoffs. Millions of workers from the third world nations are working in the region for decades. Since the Gulf States don’t offer the option of citizenship through naturalisation process, labourers are most likely to be forced back to countries of their nationalities. These workers are a major source of remittances for the countries of their origin. Approximately, three million Pakistanis are working in the region and have been a significant source of foreign exchange for Pakistan, which in turn is a major reliant on workers’ remittances as trade deficit gap continues to rise. The continuous increase in the amount of remittances in recent years has helped Pakistan bridge the widening trade deficit. With the financial situation worsening in the Middle East, remittances are going to take a hit and can cause significant shocks to Pakistani economy. Pakistan needs to realise the effects of projected layoffs and decline of foreign remittances and should take measures to curb the trade deficit through improving exports and making the environment conducive to foreign direct investment. *