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KARACHI: The State Bank of Pakistan (SBP) Monday signed an agreement with the Saudi Fund for Development (SFD) for a deposit of $3 billion to build Pakistan’s foreign exchange reserves.

In October, during the visit of Prime Minister Imran Khan, Saudi Arabia agreed to provide some $3 billion in foreign currency support in the shape of safe deposits for a year to address Pakistan’s balance of payments crisis. The neighboring country also announced a one-year deferred payment facility for import of oil.

Accordingly, on Saturday, the federal cabinet approved a summary of the deal of Saudi Arabia’s $3 billion support package for Pakistan in safe deposits and $1.2bn worth of oil supplies on deferred payments.

After approval from the federal cabinet, a formal deposit agreement has been signed between the Saudi Fund for Development and the State Bank.

Pakistan, Saudi Arabia sign $3-billion deposit agreement

According to the SBP announcement, a deposit agreement between the Kingdom of Saudi Arabia, represented by the Saudi Fund for Development (SFD), and the Government of the Islamic Republic of Pakistan, represented by the State Bank of Pakistan (SBP), has been signed on Monday by the Chief Executive Officer of SFD, H.E. Sultan Bin Abdul Rahman Al-Marshad and the Governor SBP, Dr. Reza Baqir at the State Bank of Pakistan in Karachi, Pakistan.

Under this deposit agreement, SFD will place a deposit of $3billion with SBP for the support of external accounts. The deposit amount under the agreement will become part of SBP’s Foreign Exchange Reserves. It will help support Pakistan’s foreign currency reserves and contribute towards resolving the adverse effects of the COVID-19 pandemic.

The SBP said that the deposit agreement reflects the strong and special relationship between the Kingdom of Saudi Arabia and Pakistan and will further augment the economic ties between the two brotherly countries.

With the arrival of these inflows, the country’s total liquid foreign reserves are likely to cross $ 25 billion mark. Currently, total foreign exchange reserves stood at $ 22.774 billion on 19-November 2021. The SBP’s reserves are estimated to reach $19.5 billion.

The deposit of $3 billion from Saudi Arabia will support the balance of payment, which is deteriorating followed by higher import bills. Pakistan posted over $5 billion current account deficit in July-Oct of FY22 as against $1.3 billion surplus in the same period of last fiscal year.

Copyright Business Recorder, 2021

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