Saudi Arabia has agreed to provide Pakistan with a "sizeable package" of around USD 8 billion to help the cash-starved country bolster dwindling forex reserves and revive its ailing economy, a media report said on Sunday. Pakistan has faced growing economic challenges, with high inflation, sliding forex reserves, a widening current account deficit and a depreciating currency.
Pakistan secured the deal during the visit of Prime Minister Shehbaz Sharif to Saudi Arabia. The financial package includes doubling of the oil financing facility, additional money either through deposits or Sukuks and rolling over of the existing USD 4.2 billion facilities, The News newspaper reported.
"However, technical details are being worked out and it will take a couple of weeks to get all documents ready," the report said, citing top official sources privy to the development.
Prime Minister Sharif and his official entourage have left Saudi Arabia but Minister for Finance Miftah Ismail is still in the Gulf country to finalise the modalities of the financial package. "Just said goodbye to Prime Minister Shehbaz Sharif and other colleagues at Jeddah Airport, who are on their way to Islamabad after a brief stopover in Abu Dhabi to meet Crown Prince Muhammad Bin Zayed. I remain in SA to meet Saudi officials and start technical-level talks," Ismail said in a tweet.
Pakistan had proposed doubling the oil facility from USD 1.2 billion to USD 2.4 billion and Saudi Arabia agreed to it. It was also agreed that the existing deposits of USD 3 billion would be rolled over for an extended period of up to June 2023, according to an official. "Pakistan and Saudi Arabia discussed an additional package of over USD 2 billion either through deposits or Sukuk and it is likely that more money will be provided to Islamabad," the report said, adding that the size of the total package will be determined when the additional money is finalised.
Saudi Arabia provided USD 3 billion deposits to the State Bank of Pakistan in December 2021 while the Saudi oil facility was operationalised from March 2022, providing Pakistan with USD 100 million to procure oil. The oil-rich Gulf nation had provided a USD 7.5 billion package to Pakistan during the last tenure of the PML-N government (2013-18). Under the PTI-led regime headed by ex-prime minister Imran Khan, Saudi Arabia provided a package of USD 4.2 billion, including USD 3 billion deposits and a USD 1.2 billion oil facility for one year and linked it with the IMF programme.
Saudi Arabia has provided an enhanced financial package to Pakistan when its economy is in dire straits and the country is facing a balance of payment crisis. The country’s foreign exchange reserves have depleted by USD 6 billion in the last six to seven weeks and nosedived to USD 10.5 billion. With the rising current account deficit at USD 13.2 billion in the first nine months and pressing external loan repayment requirements, Pakistan requires financial assistance of USD 9-12 billion till June 2022 to avert further depletion of foreign currency reserves.