By Staff Reporter
ISLAMABAD: Saudi Arabia is planning to renew its $3 billion deposit in assistance to Pakistan, as the South Asian nation looks to rein in one of Asia’s highest inflation rates and stave off a current-account crisis, according to people familiar with the matter, reported Bloomberg.
The Saudi Finance Ministry plans to renew its $3 billion deposit with State Bank of Pakistan as soon as this week, the people said, asking not to be identified discussing private deliberations. The kingdom also plans to provide $100 million a month for 10 months in petroleum products that will be granted as additional support, the people added. Pakistan’s funding gap has been covered after the kingdom’s commitment, the people said, adding that the assurance will pave the way for the International Monetary Fund’s loan approval at the end of the month. Saudi Arabia has been coordinating with the IMF to ensure that Pakistan is fully supported, one of the people said.
One of the persons claimed that the announcement of the commitment may happen within the next two days. Saudi Arabian and Pakistani Finance Ministry representatives did not immediately reply to requests for comment from Bloomberg. The assistance comes as the IMF is evaluating Saudi Arabia’s commitment to finance Pakistan before disbursing more monies to the South Asian country.
Bloomberg reported in July that the IMF wanted to ensure that Saudi Arabia will follow through with as much as $4 billion in funding to Pakistan to ensure Islamabad does not have a funding gap after the IMF loan. Pakistan has a gaping trade deficit, a large fiscal hole and a $1.7 billion debt payment due in December. Averting default will depend on whether external support from Saudi Arabia and other countries materializes. Without it, default seems increasingly likely.
Saudi Arabia extended support multiple times to the nation. It pledged $4.2 billion in assistance to Pakistan when the former prime minister, Imran Khan, visited the kingdom in October. That included a deposit of $3 billion with the State Bank of Pakistan to help shore up its reserves and a facility to finance oil derivatives trade worth $1.2 billion during the year. The kingdom discussed extending the term of its $3 billion deposit with Pakistan when Pakistan’s Prime Minister Shehbaz Sharif met the kingdom’s Crown Prince Mohammed bin Salman in May.
The issue is important because, despite the IMF’s scheduled loan of $1.2 billion to Pakistan, Prime Minister Shehbaz Sharif’s administration would not be able to avoid a default on its debt with this amount. Last month, Pakistan and the IMF reached a staff-level agreement to resurrect its rescue plan. The board of the IMF could decide against authorising the cash release if there is a risk of default.
