During Prime Minister Shehbaz Sharif’s visit, Pakistan got a “sizeable package” of roughly $8 billion from Saudi Arabia, including tripling the oil finance facility, extra money via deposits or Sukuks, and rolling over the existing $4.2 billion facilities.
“However, technical details are being worked out, and it will take a couple of weeks to have all paperwork completed and signed,” top government sources familiar with the situation told The News on Saturday. Prime Minister Shehbaz Sharif and his formal entourage have departed Saudi Arabia, while Finance Minister Miftah Ismail is still in the country to negotiate the details of the expanded financial package.
Sharing the highlights of the financial package, the source stated that Pakistan suggested increasing the oil facility from $1.2 billion to $2.4 billion, to which the Kingdom of Saudi Arabia accepted. It was also decided that the current $3 billion deposits will be rolled over for a longer length of time, up to June 2023.
“Pakistan and the Kingdom of Saudi Arabia discussed an additional package of over $2 billion, either through deposits or Sukuk, and it is likely that even more money will be provided to Islamabad,” said official sources, adding that the total size of the package would be determined once additional funds were finalised. Saudi Arabia gave the State Bank of Pakistan with $3 billion in deposits in December 2021, while the Saudi oil facility became effective in March 2022, with Pakistan receiving $100 million to acquire oil. During the PMLN’s previous mandate, Saudi Arabia offered a $7.5 billion package (2013-18). Saudi Arabia contributed a $4.2 billion package, comprising $3 billion in deposits and a $1.2 billion oil facility for one year, under the PTI-led administration, and connected it to the IMF programme.
Now, Saudi Arabia has presented Pakistan with an increased financial package at a time when the country’s economy is in shambles and the government is facing a balance of payment problem. The country’s foreign exchange reserves, which are kept by the State Bank of Pakistan, have been drained by $6 billion in the previous six to seven weeks and have now fallen to $10.5 billion. With an increasing current account deficit of $13.2 billion in the first nine months and pressing external loan repayment obligations, Pakistan needed $9 to $12 billion in financial infusions through June 2022 to avoid further depletion of foreign currency reserves. Pakistan will have to repay $3 billion in foreign debt servicing in the current fiscal year’s last quarter (April-June).
The revival of the IMF programme is deemed necessary because the gross external financing requirement is estimated to be $35 billion during the next fiscal year 2022-23, and the huge financing gap cannot be bridged without the program’s support. However, independent economists such as Dr. Ashfaque Hasan Khan advocate for a restriction on the importation of luxury automobiles and other non-essential commodities in order to save money.
Miftah Ismail later stated in a tweet, “I just said good-by to Prime Minister Shehbaz Sharif and other colleagues at Jeddah Airport, as they were on their way to Islamabad following a brief layover in Abu Dhabi to visit Crown Prince Muhammad Bin Zayed. I’m staying in Saudi Arabia to meet with Saudi authorities and begin technical negotiations.”