Saudi Arabia will deposit three billion dollars in Pakistan’s central bank and provide oil on defer payments to help the country overcome a deepening economic crisis, officials said on Wednesday.
Pakistan’s Information Minister, Fawad Chaudhry said the money from the Islamic Kingdom will be used to maintain central bank’s depleting reserves at a safe level.
Riyadh will also provide Pakistan a 1.2-billion-dollar-a-year lifeline to buy oil on defer payments to cover one of the main imports of the country that is facing a balance of payment crisis.
Pakistan’s Foreign Ministry said the assistance was agreed as Pakistan’s Prime Minister, Imran Khan’s last weekend visited Saudi Arabia and met with Crown Prince Mohamed bin Salman.
The agreement came as a boost for Pakistan after the country’s negotiations with the International Monetary Fund (IMF) to revive a 6-billion-dollar bailout package ran into trouble due to lack of progress on a reforms deal.
The IMF has been pushing Pakistan to fix a market-based exchange rate that saw a freefall of the local currency from 153 a rupee against a dollar in May to 175 on Tuesday.
However, the currency depreciation coupled with a record increase in energy prices pushed the inflation beyond 10 per cent last week.
“That triggered political protests and the continuous decline of main index on the stock exchange,” the officials said.
Saudi Arabia and Pakistan, both Sunni-majority muslim countries, have been allies for decades but the relations were strained in recent years.
In 2018 Riyadh announced the same package for Islamabad but it did not materialise after Pakistan warmed up to Turkey and Malaysia, two Islamic nations Saudis consider rivals.