By Staff Reporter
KARACHI: Saudi Arabia extended the term of a $3 billion deposit it made to Pakistan’s foreign reserves, the central bank said on Friday.
The deposit matured on December 5, but that has now been extended to next year. Saudi Arabia deposited the money in Pakistan’s central bank in 2021 as a loan to shore up the cash-strapped country’s reserves.
The central bank reserves stood at $7.5 billion as of November 25. With a yawning current account deficit and foreign reserves falling to only 4 weeks of import cover, the dollar hungry Pakistan is in dire need of external finances.
“… the Saudi Fund for Development (SFD) extended the term for the deposit provided by the Kingdom of Saudi Arabia in the amount of 3 billion dollars to the State Bank of Pakistan,” the State Bank of Pakistan (SBP) said in a statement.
“The extension of the term of the deposit is a continuation of the support provided by the government of the Kingdom of Saudi Arabia to the Islamic Republic of Pakistan, as the deposit aimed to shore up the foreign currency reserves in the bank and help Pakistan in facing the economic repercussions of the Covid-19 pandemic.”
The SBP said the deposit also helped the country to meet external sector challenges and achieve sustainable economic growth.
The world’s top oil exporter, which has traditionally provided financial aid to Pakistan, in August last also agreed to support the country with $1 billion in petroleum products over 10 months.
Analysts say Pakistan’s widening current account deficit has drained its foreign exchange reserves and the Saudi rollover is unlikely to support the current level of reserves. A low level of reserves has caused severe pressure on the currency market with the rupee witnessing its worst monthly in the last fiscal year.
Investors have become increasingly concerned that the country could be at risk of a default though the central bank said it would make $1 billion in repayment on an international sukuk bond on its due date,
Prime Minister Shehbaz Sharif welcomed the Saudi deposit extension, saying it would help improve Pakistan’s economic situation.
“Pakistan’s economic self-reliance is the first national agenda for which political stability and a balanced economy are the need of the hour,” the primer said in a statement.
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