If minus the Saudi deposit of $3 billion, actual reserves held by the central bank are only $5.524 billion — enough to cover even less than a month’s imports.
By Staff Reporter
KARACHI: Saudi Arabia renewed a $3 billion deposit at Pakistan’s central bank to bolster the south Asian state’s depleting foreign reserves, the central bank said on Sunday.
The Saudi deposits are set to mature in December.
The State Bank of Pakistan (SBP) said the Saudi Fund for Development (SFD) has confirmed rollover of $3 billion deposit maturing on December 5, 2022 for another one year. “Deposit is placed with SBP and is part of its forex reserves. This reflects the continuing strong and special relationship between KSA and Pakistan,” the central bank said on its official twitter handle.
Saudi Fund for Development (SFD) has confirmed rollover of $3bn deposit maturing on 5Dec22 for one year. Deposit is placed with SBP and is part of its forex reserves. This reflects continuing strong and special relationship between KSA and Pakistan. Old PR https://t.co/YvQ9VXPq0x
— SBP (@StateBank_Pak) September 18, 2022
Cash-strapped country’s foreign currency reserves have fallen to an alarming level of $8.524 billion as of September 9 due to the increased debt payments and a lack of external financing. Total liquid foreign reserves held by the country stood at $14.317 billion.
If minus the Saudi deposit of $3 billion, actual reserves held by the central bank are only $5.524 billion — enough to cover even less than a month’s imports.
The agreement for the deposit was signed in November 2021 with an aim to improve the SBP’s foreign exchange reserves after the adverse effects of the Covid-19 pandemic.
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.
However, 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 its currency market with the rupee witnessing its worst monthly performance in July in over 50 years.
Investors have become increasingly concerned that the country could be at risk of a default as it struggles with a widening current account deficit and a depreciating currency amid soaring commodity prices and tighter credit conditions.
The rupee gained some ground as Pakistan met all prior conditions of the IMF, a development that helped it secure $1.17 billion of inflow under the Extended Fund Facility (EFF).
However, lately, the local currency has come under severe pressure yet again, hovering near its all-time low as funding expected from friendly countries has not materialised yet.
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