KARACHI: Pakistan and Saudi Arabia have signed an agreement to pave way for receipt of $3 billion financial assistance announced by the Kingdom in October.
The State Bank of Pakistan (SBP) on Monday said that a deposit accord between the Kingdom of Saudi Arabia and the Government of Pakistan was signed by the Chief Executive Officer of Saudi Fund for Development Sultan Bin AbdulRahman Al-Marshad and the Governor SBP Dr Reza Baqir at the State Bank of Pakistan in Karachi.
Under this deposit agreement, SFD shall place a deposit of USD3.0 billion with SBP, the statement added.
“The deposit amount shall become part of the central bank’s foreign exchange reserves,” it said. “It will help support Pakistan’s foreign currency reserves and contribute towards resolving the adverse effects of the Covid-19 pandemic.”
According to the SBP, the deposit agreement reflects the strong and special relationship between the Kingdom of Saudi Arabia and Pakistan and it is expected to further augment the economic ties between the two brotherly countries.
Earlier, on November 27, the proposed agreement with the Saudi government was also forwarded to the Ministry of Law and the Office of the Attorney General. Following the legal opinion, a copy of the agreement was submitted for approval to the federal cabinet. The federal cabinet approved the State Bank’s retention of $3 billion from the Saudi Development Fund (SDF).
On October 27, Saudi Arabia agreed to provide $3 billion to Pakistan in the shape of cash assistance along with a $1.2 oil facility on deferred payment.
The SBP has finalized all arrangements and now everything is in place and the amount of the agreed deposit will be received within the next couple of days. Pakistan would, however, pay the Saudi government a 4 percent yearly profit on this sum, sources confirmed.
It is the second financial assistance package that the kingdom has extended to Pakistan in the past three years, aiming to help the country manage a brewing external sector crisis.
The Kingdom of Saudi Arabia had extended a similar package valued at $6 billion in October 2018 to provide breathing space to Pakistan before the country went to the International Monetary Fund for an extended loan facility.
Muzammil Aslam, Spokesperson for Adviser to the Prime Minister on Finance, said Pakistan is expecting to get $7 billion from just three sources over the next 60 days, according to a media report.
These include $3 billion in deposits from Saudi Arabia, a $1.2 billion Saudi Oil Facility with deferred payments, an $800 million Islamic Development Bank oil facility, $1 billion raised through the issuance of Sukuk bonds, and $1 billion from the IMF. All of these dollar inflows, he argued, would be sufficient to alleviate pressure on existing import bills.