Finance Minister Ishaq Dar Announces $2 Billion Deposit from Saudi Arabia into State Bank of Pakistan Account Following Pakistan-IMF Deal
During a press conference on Tuesday, Finance Minister Ishaq Dar revealed that Saudi Arabia has made a substantial deposit of $2 billion into the State Bank of Pakistan (SBP). This significant inflow comes just days after Islamabad reached a staff-level agreement with the International Monetary Fund (IMF) on a $3 billion Stand-By Arrangement.
Dar emphasized that this deposit has had a positive impact on the forex reserves held by the central bank and will be duly reflected in the forex reserves for the week ending July 14.
The influx of funds follows Pakistan’s recent signing of a short-term IMF deal on June 30, entailing a standby arrangement that will disburse $3 billion over a nine-month period. The approval of the disbursement is contingent upon the IMF board’s decision, which is scheduled to convene on July 12.
The deposit from Saudi Arabia signifies a strong show of support for Pakistan’s economic stability and its efforts to strengthen its financial position. The additional funds will aid in bolstering the country’s reserves, further stabilizing its economy, and facilitating its ongoing development initiatives.
Multilateral and bilateral funds were a major obstacle in the way of Pakistan’s deal with the IMF — which remained stalled for more than nine months and expired.
The SBA has now provided the nation with a breathing space, avoiding a sovereign default, and helped the government streamline fiscal policies.
With sky-high inflation and foreign exchange reserves barely enough for a month of controlled imports, analysts say Pakistan’s economic crisis could have spiralled into a debt default in the absence of the IMF bailout.
Dar — on behalf of Prime Minister Shehbaz Sharif — thanked Chief of Army Staff General Asim Munir for playing his role in helping the government, while he also lavished praise on Saudi rulers for being “true brothers”.
“In the coming days, I believe that there will be more positive developments on the economic front, we have reached stability,” the finance minister said.
After the IMF deal, Fitch credit rating agency Monday — after almost a year — upgraded Pakistan’s long-term foreign currency issuer default rating to CCC from CCC-.
Fitch said in a statement the upgrade reflected the country’s improved external liquidity and funding conditions following a SLA with the IMF, but warned that the fiscal deficit still remained wide.
With the IMF deal in place, Pakistan can now unlock other external financing.
In the plan sent to the lender, sources in the Finance Division said that Pakistan arranged $3.5 billion in bilateral funds from China, $2 billion from Saudi Arabia, and $1 from the United Arab Emirates.
On the multilateral side, Pakistan aims to secure $500 million from Asian Development Bank, $500 million from World Bank, and $3 billion from the IMF.
Fitch said local authorities expect $25 billion in gross new external financing in FY24, against $15 billion in public debt maturities, including $1 billion in bonds and $3.6 billion to multilateral creditors.
The South Asian nation has seen also seen severe political uncertainty since former prime minister Imran Khan was ousted through a no-confidence motion in April last year.
In a bid to ensure that the programme’s measures are implemented in the lead-up to the elections due in October, the lender’s team met all mainstream political parties to seek support and consensus for the SBA.
Khan’s Pakistan Tehreek-e-Insaf said he gave his support for the deal.