Saudi deposit $2 Billion to Pakistan to support its foreign reserves

Pakistan's Finance Minister, Ishaq Dar, announced on Tuesday that the country has received a new Saudi deposit worth $2 billion to bolster its foreign exchange reserves. This comes ahead of an expected approval of a loan by the International Monetary Fund (IMF) for Islamabad.

Pakistan's economy is facing a balance of payments crisis, with the cost of servicing external debt rising alongside internal political turmoil that has deterred foreign investment. These factors have led to a sharp increase in inflation and a record decline in the value of the local currency, while Islamabad struggles to finance imports, resulting in a steep decline in industrial production.

Dar stated in televised remarks on Tuesday that "Saudi Arabia has recently announced depositing an additional $2 billion in Pakistan's central bank account," adding that this amount has been deposited.

As a result, Pakistan's total foreign currency reserves rise to $6.5 billion, representing an increase of approximately 50% from the previous week.

Faisal Shaji, a researcher at Standard Capital Securities, told AFP that the new deposit will contribute to stabilizing Pakistan's foreign reserves and improve its credit rating in international markets. He added, "It is also a significant and important development towards an agreement with the International Monetary Fund. As a result, the Pakistani currency will strengthen, and the stock market will be positively affected."

After months of protracted negotiations, the IMF announced last week that an agreement has been reached with Pakistan for a $3 billion loan, following the government's fulfillment of final conditions and obtaining guarantees of additional financial support from friendly countries.

The IMF Board will discuss the agreement and give final approval in a meeting scheduled for mid-July.

Pakistan's economy has suffered from mismanagement for years, and its crisis has been exacerbated by multiple factors, including the COVID-19 pandemic, global energy price hikes, and catastrophic floods that engulfed one-third of the country's territory last year.

Annual inflation recorded a decline in June for the first time in seven months, standing at 29.4% compared to June 2022, compared to a record high of 38% in May.

This has provided a glimmer of hope for the government, which is expected to call for elections this year.

 

AFP