Saudi Arabia has agreed to renew a $3 billion loan deposited with the State Bank of Pakistan, in a bid to help Pakistan bolster its depleting foreign exchange reserves, Bloomberg and FinancialTimes reported Monday.
The Saudi Ministry of Finance will also provide $100 million per month for 10 months in petroleum products which will be granted as additional support, the two publications quoted people close to the development as saying.
“The Saudi Ministry of Finance plans to renew its $3 billion deposit with the State Bank of Pakistan as early as this week,” Bloomberg said.
The loan refinancing reports coincide with a phone conversation between Saudi Crown Prince Mohammad Bin Salman and Prime Minister Shehbaz Sharif.
The Saudi Press Agency reported on Monday that Bin Salman received a phone call from Sharif on Sunday and during the call “they reviewed the fraternal and historical relations between the Kingdom and Pakistan, in addition to discussing the opportunities for cooperation between the two countries and ways to strengthen them in various fields.
The Saudi Crown Prince has accepted Prime Minister Shehbaz Sharif’s invitation for a state visit to Pakistan, SAMAA TV reported.
Implications for the IMF program
The Saudi decision to refinance the loan will help Pakistan secure the next $1.2 billion loan tranche from the IMF, whose board is due to meet this month to approve disbursement.
The IMF agreed last month to increase its loan program from $1 billion to $7 billion, but made disbursement conditional on assurances that Pakistan would receive additional financial support from elsewhere.
“Saudi Arabia has agreed to renew its $3 billion deposits in the State Bank of Pakistan [central bank] reserves, which will help revive IMF lending,” a senior Pakistani official told the Financial Times.
The official said Pakistan, the IMF and Saudi Arabia had also discussed the possibility that Islamabad could borrow up to $2.8 billion against Riyadh’s Special Drawing Rights (SDR) quota from the fund. , reported the British daily.
“Once finalized, the extent of Pakistan’s borrowing from the IMF in the current financial year [July to June] will increase by $2.8 billion. It will be a very important gesture,” the official said.