ISLAMABAD: Saudi Arabia and Pakistan have signed the deposit agreement for the $3 billion loan package from the kingdom. The money is expected to reach the country this week.
Under the agreement Saudi Funds for Development will deposit $3 billion with the State Bank of Pakistan. The amount will be a part of Pakistan’s Foreign Exchange Reserves.
The agreement will help support the country’s foreign currency reserves and contribute towards resolving the adverse effects of the COVID-19 pandemic.
According to economists, foreign exchange reserves are falling due to the pressure of import payments. Last week’s data released by the SBP showed a decrease of $691 million in the reserves of the central bank.
Under the aid package, Saudi Arabia will offer an oil deferred payments facility of $1.2bn per annum to Pakistan as well. The development was announced last month when Prime Minister Imran Khan met Saudi Crown Prince Mohammad Bin Salman on a visit to the kingdom.
The loan was approved by the federal cabinet last week as well.
Consequently, the Pakistan Stock Exchange witnessed a leap after weeks of declining stocks. Earlier on Monday, PSX increased by 900 points.
The Saudi Fund for Development would “deposit an amount worth of US$3 billion into the State Bank of Pakistan to help the Pakistani government support its foreign currency reserves and support it in facing the impacts of the coronavirus pandemic,” Saudi Press Agency revealed last week.
“In addition, the royal directive was issued to finance the oil derivatives trade with a total amount of US$1.2 billion throughout the year,” it added.
The SFD has underscored that the move was linked to close relations between Pakistan and Saudi Arabia.
It pointed out that “these royal directives confirm the Kingdom of Saudi Arabia’s ongoing stance in supporting the economy of the sisterly Republic of Pakistan.”
It is not the first time that Saudi Arabia would make a large deposit into the State Bank of Pakistan or offer an oil deferred payments facility.
The deferred payment facility began in 1998 when Pakistan faced international sanctions after the nuclear tests.
In 2014, Saudi Arabia deposited $1.5b into Pakistan’s Central Bank to help maintain the balance of payment.
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