ISLAMABAD: After weeks of speculation, Saudi Arabia stepped forward with a $6 billion bailout package for Pakistan’s ailing economy.
The package includes $3bn balance of payments support and another $3bn in deferred payments on oil imports.
Agreements in this regard were signed on the sidelines of the second edition of the annual Future Investment Initiative (FII) Conference in Riyadh. It showcases economic and investment opportunities in Saudi Arabia as it pursues Vision 2030 for diversifying its economy.
The Pakistani delegation was led by Prime Minister Imran Khan.
This was the prime minister’s second visit to Saudi Arabia in five weeks. The primary objective of both trips was to seek financial assistance to deal with impending balance of payments crisis.
The Foreign Office in a statement said: “A MoU was signed between the Finance Minister Asad Umar and the Saudi Finance Minister Muhammad Abdullah Al-Jadaan. It was agreed Saudi Arabia will place a deposit of USD 3 Billion for a period of one year as balance of payment support.”
It was further “agreed that a one year deferred payment facility for import of oil, up to USD 3 Billion, will be provided by Saudi Arabia.
This arrangement will be in place for three years, which will be reviewed thereafter”.
Pakistan imports 110,000 barrels of crude per day from Saudi Arabia. Taken at the current price, the oil imports from the kingdom amount to around $3bn in a year.
Pakistan, which is facing the current account deficit of $18bn, had earlier this month sought assistance from the International Monetary Fund (IMF) to deal with the aggravating balance of payments problem. An IMF mission is scheduled to visit Islamabad on Nov 7 for talks on the size of the loan facility that Pakistan could be requiring.
Imran Khan had in an interaction with the media recently said that the country could immediately need around $12bn to address with the problem.
Saudi Arabia has in the past also helped rescue Pakistan’s economy from dire situations on a number of occasions. The Kingdom had last time in 2014 gifted Pakistan $1.5bn to beef up its foreign exchange reserves.
The Saudi package may provide breathing space to the government for dealing with economic challenges, but would not be enough to avoid the IMF facility. It is believed that improved foreign exchange reserves would strengthen Pakistan’s negotiating position in talks with the Fund.
The situation could further improve if China also makes some commitments to rescue its ‘all-weather friend’. PM Khan is scheduled to travel to China on Nov 3.