Pakistan’s central bank has received $2 billion from Saudi Arabia, announced Federal Minister Ishaq Dar, a development that gives a massive boost to the country’s low level of foreign exchange reserves.
“Our brother nation Saudi Arabia has deposited $2 billion into the account of State Bank of Pakistan (SBP),” said Dar in a video message on Tuesday. “This will directly boost the country’s foreign exchange reserves.”
The SBP’s forex reserves increased by $393 million to reach $4.46 billion at the end of last week, mainly due to receipt of official government of Pakistan inflows. Cumulatively, reserves held by the SBP have surged by $937 million in the last two weeks.
“These $2 billion will be reflected in the SBP’s reserves in the week ending July 14,” Dar added.
The finance minister also lauded the role of the Saudi government, especially King Salman and Crown Prince Mohammad bin Salman.
“I extend our heartfelt thanks to the leadership of Kingdom of Saudi Arabia for their great gesture and support by placing said deposit of $2 billion with SBP.
“I expect more positive developments on the economic front in the coming days,” said Dar.
The finance minister said Pakistan’s economic situation has almost stabilised and would now move towards growth.
Taking to Twitter, Prime Minister Shehbaz Sharif said the development “reflects the growing confidence of our brotherly countries and the international community in Pakistan’s economic turnaround”.
“We remain committed to making all necessary efforts to improve Pakistan’s economy,” PM said.
The development comes after the IMF said that its staff and Pakistani authorities have reached an agreement on policies to be supported by a $3-billion, nine-month Stand-By Arrangement (SBA).
The staff-level agreement is subject to approval by the IMF Executive Board, with its consideration expected on July 12.
“The new SBA builds on the authorities’ efforts under Pakistan’s 2019 EFF-supported programme which expires end-June,” Nathan Porter, IMF Mission Chief to Pakistan, was quoted as saying in the press release on the day the Extended Fund Facility expired.
The new IMF arrangement, seen as a massive positive for the government and the economy reeling from crisis, extends Pakistan’s commitment with the lender well into the second half of fiscal year 2023-24, and is also an upgrade from the earlier expectation that the country would receive $1.1 billion at the conclusion of the ninth review.
Experts have regularly stated the resumption of the IMF bailout package is crucial for the cash-strapped South Asian economy facing a balance of payment crisis amid low foreign exchange reserves.
As part of efforts over the last few months to secure dollar inflows, Pakistan did receive a commitment by Saudi Arabia in April to deposit $2 billion, an inflow that was contingent on revival of the IMF programme.
With a staff-level agreement now reached over the new SBA, Pakistan has started to see a reversal of economic fortune with Fitch Ratings upgrading the country’s Long-Term Foreign-Currency Issuer Default Rating (IDR) to ‘CCC’ from ‘CCC-’ on Monday. Additionally, the KSE-100 has rallied to reach an over 14-month high, and the currency has strengthened from its level at around 286 to under 279 since the staff-level agreement.