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Print Print 2023-05-17

$2bn Saudi deposits: Pakistan to pay 4pc annual profit

  • Saudi Arabia had agreed to deposit amount to meet one of the preconditions of the IMF
Published May 17, 2023

ISLAMABAD: Pakistan is to pay four percent annual profit to Saudi Arabia on deposits of $ 2 billion with the State Bank of Pakistan (SBP) for a period of one year, well informed sources told Business Recorder.

Saudi Arabia, sources said, had agreed to deposit $ 2 billion to meet one of the preconditions of International Monetary Fund (IMF) in which Pakistan had been asked to arrange external funding reportedly up to $ 6 billion.

United Arab Emirates (UAE) has also confirmed to the IMF that it would deposit $ 1 billion with the State Bank of Pakistan.

Ninth review: fresh financing requirements unchanged, says IMF

On May 10, 2023, Finance Division, through an additional agenda item apprised the Federal Cabinet that the Kingdom of Saudi Arabia through its Ministry of Finance had agreed to deposit $ 2 billion with State Bank of Pakistan for a period of 1-year. The annual profit rate proposed was 4 percent.

The sources said draft Deposit Agreement shared by the Saudi side was forwarded to Ministry of Law and Justice and Office of the Attorney General for Pakistan for vetting and clearance in light of the Cabinet decision of May 14, 2019.

According to sources, on approval by the Federal Cabinet, the State Bank of Pakistan would be authorized by the Finance Division, Government of Pakistan to enter into the Deposit Agreement. The Ministry of Law and Justice had cleared the draft Agreement subject to fulfillment of all codal formalities whereas FBR had given concurrence for tax exemption.

Saudi Arabia to deposit $2bn in Pakistan’s central bank in 7 working days: report

Finance Division sought Cabinet’s approval for the Deposit Agreement and the Authorization Letter in terms of Rule 16(1Xd) of the Rules of Business, L973 read with the observations of the Office of Attorney General for Pakistan.

After brief discussion, the Cabinet gave its nod to the summary titled ‘Deposit Agreement between the Kingdom of Saudi Arabia (through the Ministry of Finance) and the Islamic Republic of Pakistan (through State Bank of Pakistan (SBP) of May 10, 2023,’ submitted by the Finance Division.

The Cabinet authorized the Cabinet Division to issue the decision in the instant case without waiting for the formal approval of the minutes.

Copyright Business Recorder, 2023

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Comments

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Syd May 17, 2023 07:25am
Isnt that riba ? Mr. Dar will not approve.
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TimeToMovveOn May 17, 2023 08:01am
How is paying 4% Sharia Compliant. Isnt Interest haram?
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Tulukan Mairandi May 17, 2023 08:26am
Isn't interest haram? But anyway although 4% is high by global standards for a sovereign loan in USD, it's very low by Pakistani standards. For comparison, Pakistan is paying its iron brother China up to 22% for some loans.
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Tulukan Mairandi May 17, 2023 08:28am
Along with the deposits Pakistan will be expected to support with men in Yemen conflict, downgrade ties with Turkey, import all Saudi human and industrial waste for consumption in Pakistan, and sell Pakistanis for biological experiments as a part of NEOM project.
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Tuluka thevidiya May 17, 2023 09:00am
@Tulukan Mairandi, atleast some use for pakistan
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Karl May 17, 2023 10:27am
and from where will we be able to arrange the USD80,000,000/-(4% of 2,000,000,000) to pay back after one year?????
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Jani Walker May 17, 2023 11:44am
@Syd, Riba is halal, profit is haram.
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Ooooo May 17, 2023 12:14pm
@Tulukan Mairandi, could you please explain, how you know all this ? Are you in finance department of Pakistan or saudia Arabia. You are the prime example of crackhead
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Tulukan Mairandi May 17, 2023 01:37pm
Isn't interest disallowed (Riba). But frankly 4% is very low by Pakistani standards. We pay 25% to Iron Brother China. Although by global standards 4% is high for a sovereign guarantee loan.
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Hidayatullah May 17, 2023 01:50pm
The great leader ik.. Love u
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Tulukan Mairandi May 17, 2023 01:57pm
@Karl, borrow again at 8% interest rate.
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K Khan May 17, 2023 07:18pm
So much for Riba free banking in Saudi Arabia. Maulanas comments needed!
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Junaid May 18, 2023 12:45am
@Tulukan Mairandi, Could you please let me know about the specific loans which Pakistan is paying a 22% interest rate on?
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KhanRA May 18, 2023 01:00am
We think interest is haram, and that our friends should loan us money without us having to even pay for costs of currency depreciation. Do we realize they can use this money to invest and make money somewhere else? We have to compensate them for that loss of potential income - otherwise they are taking a loss by lending us money. This is why financial systems operate on interest. We need to get our religious interpretations in line with modern times.
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Shahzad imran May 18, 2023 07:03am
@Jani Walker, how
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Skardu Mount May 18, 2023 04:34pm
@Junaid , 1) Wo Xiang Zhu Wei Xi loan - 21.72% 2) Lei Pun Daa Ma Va Ney loan - 23.05% 3) Zhonggou Red Pearl Sinopak facility - 26%
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Imrandar May 18, 2023 09:24pm
@Skardu Mount, Don't forget Facility 4461/22 - China Shada Far Carp Refinancing - 31,875% interest rate + 2% admin fee.
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Tahir Alvi May 19, 2023 12:12pm
Utilizing the loan amount effectively helps keep interest rates affordable while taking out loans is a common practice among nations both locally and internationally. However, utilizing them in an effective manner can often lead to better returns compared to merely being burdened with high interest rates Taking out loans is a common practice amongst nations like Japan and India who know how to use it effectively for long-term gains Countries like Pakistan or Nigeria have a prevalent culture of corruption that does not benefit the masses but only a select few become wealthier.
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