ISLAMABAD, Jul 11 (NNI) : Finance Minister Ishaq Dar announced on Tuesday that Pakistan has been granted $2 billion from Saudi Arabia, marking a significant advancement for the financially strained country as it grapples with meeting its external financial obligations.
The Pakistan government’s negotiations with the International Monetary Fund (IMF) faced considerable challenges primarily due to the hindrance posed by multilateral and bilateral funds. These hurdles resulted in a prolonged delay of over nine months, ultimately leading to the expiration of the agreement with the IMF.
Islamabad then signed a short-term IMF deal on June 30 under a standby arrangement that will disburse $3 billion over a nine-month period, subject to approval by the IMF’s board, which is meeting on July 12.
The SBA has now provided the nation with a breathing space, avoiding a sovereign default, and helped the government streamline fiscal policies.
“SBP has received a deposit of $2 billion from the Kingdom of Saudi Arabia,” Dar said during a press conference, adding that this inflow has increased the forex reserves held by the central bank and will accordingly be reflected in the forex reserves for the week ending July 14.
With sky-high inflation and foreign exchange reserves barely enough for a month of controlled imports, analysts say Pakistan’s economic crisis could have spiralled into a debt default in the absence of the IMF bailout.
Dar — on behalf of Prime Minister Shehbaz Sharif — thanked Chief of Army Staff General Asim Munir for playing his role in helping the government, while he also lavished praise on Saudi rulers for being “true brothers”.
“In the coming days, I believe that there will be more positive developments on the economic front […] we have reached stability,” the finance minister said.
After the IMF deal, Fitch credit rating agency Monday — after almost a year — upgraded Pakistan’s long-term foreign currency issuer default rating to CCC from CCC-.
Fitch said in a statement the upgrade reflected the country’s improved external liquidity and funding conditions following a SLA with the IMF, but warned that the fiscal deficit still remained wide.
With the IMF deal in place, Pakistan can now unlock other external financing.
In the plan sent to the lender, sources in the Finance Division said that Pakistan arranged $3.5 billion in bilateral funds from China, $2 billion from Saudi Arabia, and $1 from the United Arab Emirates.
On the multilateral side, Pakistan aims to secure $500 million from Asian Development Bank, $500 million from World Bank, and $3 billion from the IMF.
Fitch said local authorities expect $25 billion in gross new external financing in FY24, against $15 billion in public debt maturities, including $1 billion in bonds and $3.6 billion to multilateral creditors.
The South Asian nation has seen also seen severe political uncertainty since former prime minister Imran Khan was ousted through a no-confidence motion in April last year.
In a bid to ensure that the programme’s measures are implemented in the lead-up to the elections due in October, the lender’s team met all mainstream political parties to seek support and consensus for the SBA. NNI
