Saudi Arabia to increase investment amid Pakistan’s financial demand
Pakistan Army Chief General Asim Munir concluded his week-long visit to Saudi Arabia where he held a meeting with the Crown Prince and discussed ways to improve relations between the two countries.
Saudi Crown Prince Mohammed bin Salman has ordered officials to investigate the Gulf kingdom’s investments in Pakistan to reach $10 billion and increase its deposits at the cash-strapped country’s central bank to $5 billion, a media report said on Tuesday. Pakistan’s economic situation is facing a serious upheaval as inflation is projected to exceed 21-23 percent in the first four months of the current fiscal year (July-October) and the country’s fiscal deficit is projected to increase to over 115 percent.
“The crown prince has ordered a study on increasing Saudi Arabia’s investments in the sister Islamic Republic of Pakistan, which was announced on August 25 last year to reach US$10 billion,” the state-run Saudi Press Agency reported. Prince Mohammed has ordered the Saudi Development Fund (SDF) to study the increase in the amount of deposits provided by the Gulf Kingdom to the Central Bank of Pakistan to $5 billion, which was earlier extended on December 2, 2022. roof.
This came within the framework of an ongoing exchange of information between the Crown Prince and Pakistan Prime Minister Shehbaz Sharif. Pakistan Army Chief General Asim Munir concluded his week-long visit to Saudi Arabia where he held a meeting with the Crown Prince and discussed ways to improve relations between the two countries.
Saudi Arabia decides to provide financial assistance to Pakistan
In 2021, the State of Pakistan (SBP) has signed an agreement with the SDF to receive $3 billion, which will be deposited in a central bank account with the aim of boosting its foreign exchange reserves, Dawn newspaper reported.
Subsequently, in September last year, the STF confirmed the withdrawal of deposits of $3 billion for one more year. The deposit was set to mature on December 5, 2022, however, Saudi Arabia extended its tenure on December 2. In the last week of October 2021, Saudi Arabia agreed to renew its financial assistance to Pakistan, including about USD 3 billion in safe deposits and USD 1.2 billion worth of oil supply in deferred payments.
The agreement was reached the same month when former Prime Minister Imran Khan visited the Gulf kingdom. Saudi King Salman ordered his government to invest US$1 billion in Pakistan in August last year. King Salman’s order comes a day after the Qatari government said it would invest US$3 billion in Pakistan.
Saudi Arabia and the United Arab Emirates have already indicated that they will contribute US$1 billion each to fund oil purchases. Later in October 2022, Prime Minister Sharif said that Crown Prince Mohammed would visit Pakistan soon, when he would announce a US$10 billion investment to set up an oil refinery in the country.
However, the planned visit was later postponed for unexplained reasons. Pakistan is currently facing a severe cash crunch as foreign exchange reserves of the State Bank of Pakistan (SBP) fell to an eight-year low of USD 5.576 billion in the week ended December 30, 2022. A place where the government can repay its foreign debts without borrowing heavily from allies.
Foreign debt servicing is a very complicated question for the Pakistan Muslim League-Nawaz (PML-N)-led coalition government. Several attempts to resume talks with the International Monetary Fund (IMF) on issuing the next tranche have so far been unsuccessful. Declining reserves have already deeply devalued the local currency against the US dollar and other major currencies.