Saudi Arabia deposits $2B in Pakistan’s central bank

Women and children wait for free food at a distribution point in Lahore, Pakistan, on Tuesday, June. 27, 2023. (AP Photo/K.M. Chaudary)

ISLAMABAD  — Saudi Arabia has deposited $2 billion into Pakistan’s central bank, the government said Tuesday, a much-needed financial boost ahead of a critical meeting of the International Monetary Fund on the new bailout package for the cash-strapped South Asian country.

In a video statement, Pakistani Finance Minister Ishaq Dar said the kingdom was making good on its promise to bolster Pakistan’s foreign exchange reserves. The infusion is not a loan as such but will shore up the reserves and remain with Pakistan’s central bank for at least a year.

The development comes on the eve of the meeting of he IMF’s executive board which is expected to approve a new and much-needed $3 billion loan to Pakistan to help the country overcome an economic crisis.

Dar said that with the Saudi deposit, Pakistan’s foreign exchange reserves which dropped to $9.6 billion last week — barely enough to pay import bills for a month — have gone up to $11.6. “We thank the Saudi leadership on behalf of the government and people of Pakistan,” he said.

He assured the nation that Pakistan would soon return to the path of growth. “God willing, now Pakistan’s economy will witness an improvement,” Dar said.

Following the announcement, Prime Minister Shehbaz Sharif tweeted his “deep gratitude to the leadership and brotherly people of the Kingdom of Saudi Arabia” and said the deposit reflects the kingdom’s growing confidence in Pakistan’s economic turnaround.

“We remain committed to making all necessary efforts to improve Pakistan’s economy,” Sharif said.

The IMF late in June agreed to provide $3 billion to Pakistan in badly needed relief to bail out the impoverished country’s ailing economy — a nine-month agreement that the IMF’s executive board is to approve Wednesday at a meeting in the United States. Pakistan also hopes the board will approve the release of a crucial $1.1 billion from the bailout.

Pakistan’s economy has faced several heavy blows recently, such as the devastating floods last summer that killed 1,739 people, caused $30 billion in damage and impacted millions of Pakistanis. The country was also hit by an international commodity price spike in the wake of Russia’s war in Ukraine.

The bailout deal was originally signed between the IMF and Pakistan’s former Prime Minister Imran Khan in 2019 and was to expire on June 30 when the new, breakthrough agreement was announced.