Saudi Arabia will discuss the option of extending the terms of its $3 billion deposit in Pakistan’s Central Bank to help Islamabad’s faltering economy.
The financial package includes doubling of the oil financing facility, additional money either through deposits or Sukuks and rolling over of the existing $4.2 billion facilities.
A joint statement was issued on Sunday following the visit of Pakistan’s new Prime Minister Shehbaz Sharif, who headed a high-level delegation to Saudi Arabia.
Saudi Arabia has provided Pakistan with $4.2 billion of support in the form of a $3 billion loan deposited with the Pakistan’s Central Bank as well as $1.2 billion in deferred oil payments to boost its foreign reserves. The cash-strapped nation’s foreign exchange reserves plunged below $11 billion last month.
“The Kingdom of Saudi Arabia affirmed its continuous support to Pakistan and its economy, including the discussion of augmenting the $3 billion deposit with the central bank through term extension or otherwise,” the statement said.
Saudia Arabia has also pledged to further enhance the financing of petroleum products at a time when Pakistan has been suffering from frequent power cuts.
The Gulf nation has long been a regular source of financial relief for successive governments.
In a tweet, Shehbaz Sharif said: “Pakistan deeply values the Kingdom’s continued support to Pakistan and the joint statement ushers in a new era of close cooperation between our two brotherly countries.”
IMF Funds Stalled
The statement comes after recent talks between Pakistan and the International Monetary Fund (IMF) over the release of funds under an existing $6 billion aid programme had stalled as the latter expressed serious concerns about slowdown in reforms.
Pakistan has faced growing economic challenges, with high inflation, sliding forex reserves, a widening current account deficit and a depreciating currency.
Pakistan had proposed doubling the oil facility from $1.2 billion to $2.4 billion and Saudi Arabia agreed to it. It was also agreed that the existing deposits of $3 billion would be rolled over for an extended period of up to June 2023.