KSA deposits $2bln in Pakistan’s bank as boost before key IMF meeting
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With the package, the Kingdom is fulfilling its promise to increase Pakistan's foreign exchange reserves.
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People wait to receive food that Saylani Welfare Trust distributed at a makeshift camp in Sehwan, Sindh province, Pakistan, on September 2022. (AFP)
The government of Pakistan said on Tuesday that Saudi Arabia had deposited $2 billion into Pakistan's central bank, providing the country with a much-needed financial boost, before a crucial International Monetary Fund (IMF) meeting on the latest bailout plan for the cash-strapped South Asian nation.
The Kingdom was fulfilling its promise to increase Pakistan's foreign exchange reserves, according to a video statement from Pakistan's Finance Minister Ishaq Dar. Although the infusion would strengthen the reserves, it is not a loan in the traditional sense and will stay with Pakistan's central bank for at least a year.
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The news breaks on the eve of the IMF executive board meeting, which is anticipated to authorize a $3 billion loan to Pakistan to aid the nation out of its current economic crisis.
With the Saudi deposit, according to Dar, Pakistan's foreign exchange reserves have increased to $11.6 billion after dropping to $9.6 billion last week, which was barely enough to cover import costs for a month.
"We thank the Saudi leadership on behalf of the government and people of Pakistan," he said.
Dar gave the nation his word that Pakistan will soon get back on the path of development, predicting that Pakistan's economy "will witness an improvement."
Following the announcement, Pakistan's Prime Minister, Shehbaz Sharif, tweeted his "deep gratitude to the leadership and brotherly people of the Kingdom of Saudi Arabia" and claimed the deposit demonstrated the Saudis' growing faith in Pakistan's economic turnaround.
According to Sharif, they remain "committed to making all necessary efforts to improve Pakistan’s economy."
In order to allegedly help Pakistan's struggling economy, the IMF agreed to lend the country $3 billion late in June. The IMF's executive board is scheduled to adopt the nine-month arrangement on Wednesday during a meeting in the United States. Pakistan also anticipates the board's approval of the vital $1.1 billion bailout release.
The Pakistani economy has been exacerbated by political instability, the global energy crisis, earthquakes, and the devastating floods that submerged large portions of the country in 2022. As a result, the country requires billions of dollars of financing to service existing debt. It is also worth noting that foreign exchange reserves have also dwindled and the value of the rupee diminished.
Despite earlier talks with friendly countries on financial bailouts, Pakistan was forced to give in to the IMF terms as the country faced a very critical economic and financial state and is unable to wait for the results of the talks.
Except for basic essential medicines and food, the Asian country has halted giving letters of credit (LOCs), which resulted in a backlog of tens of cargo ships that the country can no longer pay for.
Pakistan had previously entered dangerous territory following the ousting and assassination attempt on the highly popular former Prime Minister Imran Khan and his accusation that it was a US-backed plan involving Sharif and other governmental figures.
In 2019, Khan negotiated a loan package from the IMF; however, he failed to meet the demands on cutting subsidies and market direct intervention, which caused the issue to be stalled.
