Friendly countries support Pakistan’s weak finances. The Kingdom wants to deposit $2 billion more money in Pakistan.
As a step toward providing additional relief to Pakistan’s economy, which is reeling from deadly floods, Saudi Arabia’s Crown Prince Mohammed bin Salman has directed an investigation to increase the Kingdom’s assistance and investments in that country.
According to the Saudi Press Agency on Tuesday, the Saudi Fund for Development will study the possibility of raising the current deposit in Pakistan’s central bank from $3 billion to $5 billion. According to the same report, it will also evaluate the proposal to increase investments in Pakistan to $10 billion.
The Kingdom’s fund offers grants and low-interest loans to developing nations as a way to strengthen existing alliances and forge new ones. The announcement comes a day after the Crown Prince met with General Syed Asim Munir, head of the Pakistani army, to discuss ways to improve bilateral relations and foster cooperation.
After a standoff with the International Monetary Fund over tax targets prevented loan installments from being disbursed, Pakistan’s economy was severely cash-strapped. Floods that submerged a third of the country and reduced its growth by half made the situation worse. Pakistan has relied on friendly nations to tide over the crisis. Earlier this week, the nation received commitments of more than $10 billion in assistance.
The country’s foreign exchange reserves decreased to $5.6 billion, the lowest level in nearly nine years and just enough to pay for imports for less than one month. Downgrades were prompted by the deteriorating economic outlook, which compelled the government to announce austerity measures to lower energy costs and save money.
It is a significant commitment from Saudi Arabia, but Tahir Abbas, head of research at Karachi-based Arif Habib Ltd., predicted that it would depend on whether the IMF program would resume. “The investment would be in the construction of a refinery in Pakistan, for which the government needs to finalize the refinery policy and complete other procedures.”
Last month, Saudi Arabia offered Pakistan a third loan of $3 billion at 4% for one year. At a press conference last month, Saudi Finance Minister Mohammed Al Jadaan stated that the Saudi government will “continue to support Pakistan as much as we can.”
Pakistan also intends to ask China for an extension on a $2.1 billion loan that is scheduled to mature in March. China is the recipient of about 30% of Pakistan’s foreign debt, including that of state-owned commercial banks.