Pakistan has received $8 billion in a "sizeable package" from Saudi Arabia as the country faces dwindling foreign exchange reserves amid other economic challeges such as high inflation, a widening current account deficit, and a depreciating currency, according a media report on Sunday.
Pakistan's "The News" newspaper has reported that the country secured the deal during the visit of Prime Minister Shehbaz Sharif to Saudi Arabia — his first visit abroad as prime minister. The 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, as per the newspaper report.
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"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 aware of the development.
Sharif and his official delegation have left Saudi Arabia but Minister for Finance Miftah Ismail is still in the country to finalise the modalities of the financial package. He confirmed it in a tweet.
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, according to an official.
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"Pakistan and Saudi Arabia discussed an additional package of over $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 $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 $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 $4.2 billion, including $3 billion deposits and a $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 $6 billion in the last six to seven weeks and nosedived to $10.5 billion.
With the rising current account deficit at $13.2 billion in the first nine months and pressing external loan repayment requirements, Pakistan requires financial assistance of $9-12 billion till June 2022 to avert further depletion of foreign currency reserves.
(With PTI inputs)
