Saudi Arabia is finalising the extension of the kingdom’s $3 billion deposit to Pakistan, Saudi Minister of Finance Mohammed al-Jadaan told a British wire service.
“We are currently finalising extending the $3 billion deposit to Pakistan,” he said on the sidelines of the World Economic Forum in Davos. Last year, Saudi Arabia deposited $3 billion in Pakistan’s central bank to help support its foreign reserves.
Jadaan did not offer further details, but on May 1 the two countries said in a joint statement that they would discuss the possibility of supporting the deposit by extending its term “or through other options.”
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Pakistan is in dire need of external finances, hurt by high inflation, reserves declining to as low as less than two months’ of imports, and a fast-weakening currency.
Jadaan said Pakistan was an important ally and the kingdom would stand behind the South Asian nation. Uncertainty over the revival of an International Monetary Fund programme has compounded volatility in the economy and markets amid a political crisis. The IMF is likely to soon conclude ongoing talks over the 7th Review in Doha.
In recent years, Saudi Arabia has provided Pakistan with $4.2bn of support in the form of a $3bn loan deposited with the central bank as well as $1.2bn in deferred oil payments to boost its foreign reserves. The cash-strapped nation’s foreign exchange reserves plunged below $11bn last month.
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“The Kingdom of Saudi Arabia affirmed its continuous support to Pakistan and its economy, including the discussion of augmenting the $3bn deposit with the central bank through term extension or otherwise,” a joint statement issued on Sunday said.
The latest sign of support follows a visit to Saudi Arabia by Pakistan’s new Prime Minister Shehbaz Sharif, who has inherited a crippling national debt, galloping inflation and a weak rupee.
Reuters with additional input by GVS