Saudi Arabia has extended the term of its $3 billion deposit with the State Bank of Pakistan (SBP) for another year, in a move that will help Pakistan meet its external financing needs and support its economic recovery.
The SBP announced on Wednesday that the Saudi Fund for Development (SFD) had renewed the deposit agreement, which was due to mature on December 5, 2023, for another 12 months.
The deposit was first made in 2021 and rolled over in 2022 as a sign of the close relationship between the two brotherly countries.
The extension of the deposit term is expected to ease the pressure on Pakistan’s foreign exchange reserves, which have been declining due to debt repayments and lower inflows from overseas investors.
Pakistan’s overall foreign exchange reserves stood at $12.302 billion as of November 17, of which $7.180 billion were held by the SBP and $5.122 billion by the commercial banks8.
The country faces a challenging external financing situation, as it has to repay about $5 billion in external debt in the remaining months of the current fiscal year.
The $3 billion rollover is also seen as a positive development for the ongoing IMF programme, which requires Pakistan to secure financing commitments from its lenders and friendly countries.
The IMF’s executive board is likely to approve the second loan tranche of $700 million for Pakistan in early December, after the completion of the first review of the $3 billion stand-by arrangement.
Pakistan is also expecting to receive about $1.2 billion in financing from the World Bank, Asian Development Bank, and Asian Infrastructure Investment Bank before the end of the year. The government is also hopeful of getting more inflows from other friendly nations to support the country’s economy.
Pakistan’s economy has been struggling with low growth, high inflation, and currency depreciation in recent years. The country was on the verge of default last year, but avoided it with the help of the IMF bailout and the support from Saudi Arabia and other allies. However, the IMF programme has also imposed strict conditions on Pakistan, such as increasing gas, energy, and petrol prices, which have added to the woes of the common people.
