Monday, April 15, 2024

Saudi Extends $3bn Deposit to Help Pakistan Dwindling Economy

Immigration News

Arif Ahmadi
Arif Ahmadi
Arif Ahmadi holds a B.A. degree in Journalism. He works as an Editor & Content Writer for Khaama Press.
FILE: Pakistani rupee — the official currency of Pakistan since 1948

ISLAMABAD, Pakistan – Pakistan’s central bank said Sunday the Saudi Fund for Development will extend a $3 billion deposit currently placed in the bank’s accounts for one year, according to sources, which financial experts say could boost investor confidence in the South Asian economy.

In November 2021, the State Bank of Pakistan (SBP) signed a $3 billion deposit agreement with the Saudi Fund for Development (SFD) that aimed to help support Pakistan’s foreign currency reserves.




“Saudi Fund for Development (SFD) has confirmed rollover of $3bn deposit maturing on 5Dec22 for one year,” the central bank wrote on Twitter.

“Deposit is placed with SBP and is part of its forex reserves,” the bank further wrote. “This reflects continuing strong and special relationship between the Kingdom and Pakistan.”

The South Asian country only has enough to cover import payments for 40 days, as ARBA News wrote. Over the past couple of months, the rupee has plummeted to historic lows against the US dollar, and it continues to remain under pressure due to a demand surge for food and oil imports.

Experts say SFD’s rollover will give some breathing room for Pakistan, whose economy has been struggling to stabilize and is at risk of default. The country also faces the burden of catastrophic floods that have inflicted billions of dollars in damage, affected 33 million people, and killed over 1,500 Pakistanis.

“The rollover has definitely improved the confidence of investors and debt maturity profile of the country because now we have breathing space for another year,” Samiullah Tariq, director of research at the Pakistan Kuwait Investment Co., told Arab News on Monday.

“The sentiments of the market will continue to improve with more rollovers, which would be reflected in the credit default swap and bond yields of the country in the coming days,” he added, referring to expected rollovers of loans from China and the UAE.

Pakistan Economy in a Glimpse

Pakistan’s debt reaches to a record high, jumping to almost 60 trillion Pakistani Rupees due to a huge currency depreciation and ongoing political crisis under Shehbaz Sharif government.

The increase in public debt was PKR9.3 trillion in the past one fiscal year but it swelled up to a record PKR49.2 trillion by end-June 2022, according to the State Bank of Pakistan (SBP).

Moreover, the central bank’s latest debt bulletin for the fiscal year 2021-22 showcased that the debt burden increased in terms of the size of the national economy, indicating that Pakistan is at its worst and under a heavy load of unbearable debt burden.

According to the SBP, the total debt and liabilities of the country increased to PKR59.7 trillion, a surge of PKR 11.9 trillion, or 25 percent, compared to the preceding fiscal year which clearly indicates that in the fiscal year 2021-22, the nation added one-fourth of the debt accumulated from 1947 to June 2021.

In terms of the size of the economy, Pakistan’s total debt and liabilities were equal to 76.4 percent in 2018 which jumped to 89.2 percent by June this year despite the rebasing of the economy.

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