Pakistan has decided to seek an additional package of $3.2 billion from Saudi Arabia to jack up the total facility to $7.4 billion from the existing $4.2 billion during the current visit of Prime Minister Shehbaz Sharif, in order to avert further depletion of foreign currency reserves.
Prime Minister Shehbaz Sharif starts left for Saudi Arabia on Thursday on the invitation of Crown Prince of the Kingdom of Saudi Arabia (KSA) Mohamed bin Salman bin Abdulaziz.
“We are going to request the Kingdom of Saudi Arabia to increase the amount of the deposit from $3 billion to $5 billion and double the Saudi Oil Facility (SOF) from $1.2 billion to $2.4 billion, so the total package could be increased up to $7.4 billion during the visit of premier Shehbaz Sharif,” a top official said.
When an official of the Finance Division was contacted and asked about the proposed package from Saudi Arabia, he replied: “We are requesting for deferred payment facility and enhancing the credit extended for forex support.”
However, he showed reluctance to share information about the exact details to be requested by PM Shehbaz before the KSA authorities, especially in his meeting with Saudi Crown Prince Mohammad Bin Salman and other dignitaries.
Pakistan will also make a request to the Kingdom of Saudi Arabia for rollover of the existing package of $4.2 billion for one year till June 2023 in order to align it with the IMF programme as Islamabad has already asked the Fund to extend the existing Extended Fund Facility (EFF) for nine months till June 2023 coupled with increasing the size of the programme from $6 billion to $8 billion.
Saudi Arabia had already given $3 billion deposits to the State Bank of Pakistan and an oil facility on deferred payment worth $1.2 billion during the tenure of the last PTI-led regime. The deposits were given in December 2021, while the Saudi Oil Facility (SOF) started in March 2022 and so far, $100 million have been disbursed.
Saudi Arabia had placed stringent conditions with the last package amount of $4.2 billion and linked it to the IMF programme.
The IMF programme is expected to be revived by June end if all things settled, as Islamabad requires a breathing space for three months period.
According to the estimates calculated by Dr Hafiz A Pasha, Pakistan requires $12 billion injection in order to avert the balance of payment crisis and further depletion of the foreign currency reserves. Pakistan will have to seek rollover of $4.3 billion from China, including $2.3 billion commercial loans and remaining $2 billion deposits. PM Shehbaz is also expected to visit China next month to muster the required support from the friendly country.
Pakistan’s foreign currency reserves held by the State Bank of Pakistan depleted rapidly by $5.5 billion in the last six weeks period and stand at $10.8 billion now. Any further depletion of the foreign reserves could put the country into a crisis mode, so the government was making all-out efforts to get bridge financing from the friendly country to avoid decrease in the foreign currency reserves till the time of reviving the stalled IMF programme.
Pakistan and the IMF had already kick-started number crunching by sharing data and now the IMF review mission was expected to start parleys from the mid of May 2022 to accomplish the pending Seventh Review and release of the next tranche of $960 million.
FIRST TRIP: PM Shehbaz Sharif’s KSA visit is his first visit abroad after assuming office earlier this month, as per the Foreign Office.
In a statement, Ministry of Foreign Affairs spokesperson Asim Iftikhar said on Wednesday PM Shehbaz would visit Saudi Arabia from April 28-30, and he will be accompanied by a high-level delegation comprising key members of the cabinet.
However, the FO did not give any details about this high-level delegation at a time when there are speculations about as to who would be accompanying the prime minister. The number of the members of the delegation is missing as well.
“During the visit, the prime minister will have bilateral interaction with the Saudi leadership, with particular focus on advancing economic, trade and investment ties and creation of greater opportunities for the Pakistani workforce in Saudi Arabia. The two sides will also exchange views on a range of regional and international issues of mutual interest,” the spokesperson said.
Iftikhar said Pakistan and KSA are bound by fraternal relationship marked by mutual trust and understanding, close cooperation, and an abiding tradition of supporting each other. The people of Pakistan hold the Custodian of the Two Holy Mosques in the highest esteem.
“The bilateral relationship is complemented by close mutual collaboration at regional and international fora. Saudi Arabia is a member of the OIC Contact Group on Jammu and Kashmir. The Kingdom of Saudi Arabia is home to more than two million Pakistanis, contributing to the progress, prosperity and economic development of the two brotherly countries,” he added.
The spokesperson further noted that regular high-level visits are a key feature of this special relationship.
Iftikhar added that the prime minister’s visit to Saudi Arabia will impart a strong impetus to deepening bilateral cooperation in diverse fields and further reinforce the growing partnership between the two countries.