ISLAMABAD: Saudi Arabia plans to renew its deposit of $3 billion in aid to Pakistan, as the South Asian nation seeks to tame one of Asia’s highest inflation rates and avoid a current account crisis, according to people familiar with the matter, Bloomberg reported.
Saudi Arabia’s finance ministry plans to renew its $3 billion deposit with the State Bank of Pakistan as early as this week, the people said, asking not to be identified discussing private deliberations. The kingdom also plans to provide $100 million per month for 10 months in petroleum products which will be given as additional support, the sources added.
Pakistan’s funding gap has been covered after the kingdom’s pledge, the sources said, adding that the assurance will pave the way for approval of the International Monetary Fund loan at the end of the month.
Saudi Arabia has coordinated with the IMF to ensure Pakistan is fully supported, one of the people said. The engagement may be announced within the next two days, one of the people said.
Representatives of Saudi Arabia and Pakistan’s Ministry of Finance did not immediately respond to messages from Bloomberg seeking comment.
The aid comes as the IMF sought to assess Saudi Arabia’s commitment to funding Pakistan ahead of the multilateral lender disbursing fresh funds to the South Asian nation.
Bloomberg reported in July that the IMF wanted to ensure that Saudi Arabia would provide up to $4 billion in financing to Pakistan to ensure that Islamabad would not have a financing shortfall after the IMF loan.
Pakistan has a gaping trade deficit, a big fiscal hole and a $1.7 billion debt payment due in December. Prevention of default will depend on the materialization of external support from Saudi Arabia and other countries. Without it, default seems more and more likely.
Saudi Arabia has repeatedly lent its support to the nation. He pledged $4.2 billion in aid to Pakistan when former Prime Minister Imran Khan visited the kingdom in October. This included a $3 billion deposit with the State Bank of Pakistan to help shore up its reserves and a facility to fund trade in oil derivatives worth $1.2 billion over the course of the year. year.
The kingdom discussed extending the term of its $3 billion deposit with Pakistan when Pakistani Prime Minister Shehbaz Sharif met with the kingdom’s Crown Prince Mohammed bin Salman in May.
The case is crucial because, while the IMF must lend 1.2 billion dollars to Pakistan, this would be insufficient for the government of Prime Minister Shehbaz Sharif to avoid default.
Pakistan secured a staff-level deal with the IMF last month to reinvigorate its bailout package. If there is a risk of default, the IMF board may not approve the release of the money.
