ISLAMABAD: In a major relief for the struggling economy of Pakistan, Saudi Arabia has extended the term of its $3 billion deposit with the State Bank of Pakistan (SBP) for another year. This was announced by SBP in a statement issued here on Wednesday.
According to the statement, the Saudi Fund for Development (SFD), on behalf of the Kingdom of Saudi Arabia, has extended the term for the deposit of $3 billion for another year. The earlier deadline for the deposit was December 5, 2023.
The extension of the term of the deposit by the Kingdom of Saudi Arabia to Pakistan would provide major relief and support to Pakistan to maintain the country’s foreign currency reserves in the near future. The development would also help strengthen the country’s economic growth.
Saudi Arabia’s Support for Pakistan
Earlier in 2021, the $3 billion deposit agreement was signed with SBP through the SFD, which was rolled over subsequently in 2022 after the issuance of the “royal directives that reflect the continuation of the friendly ties between the two brotherly countries”.
Pakistan’s economy remained under immense pressure during the last couple of years, followed by an alarming decline in its foreign reserves. In addition, the country got a narrow escape from default last year after the timely inflow from the International Monetary Fund (IMF) while approving a short-term bailout with strict conditions. Later, Saudi Arabia and the UAE also provided major support to the country.
According to SBP, the foreign exchange reserves held by the central bank recorded a decline by $217 million to $7.180 billion in the week ending November 17, while reserves held by commercial banks were down to $5.122 billion, taking the overall reserves to $12.302 billion.
However, the decline occurred due to the debt repayment, SBP added. Pakistan would face further debt repayment of about $5 billion in the coming months, which would be a challenging task.
However, the expected financing from the IMF, bilateral, and other multilateral partners would possibly support the depletion of foreign exchange reserves.
Pakistan expects to secure a tranche of $700 million from the IMF’s existing loan program after completing a first review, possibly in the first week of December.
It is projected that Pakistan will receive about $1.2 billion in financing from the World Bank (WB), Asian Development Bank (ADB), and Asian Infrastructure Investment Bank before the end of the year. Pakistan also expects further inflows from friendly countries to support the country’s ailing economy.
