During Prime Minister Shehbaz Sharif’s visit to Saudi Arabia, Pakistan received a “sizeable package” worth roughly $8 billion, which included tripling the oil finance facility, extra money in the form of deposits or Sukuks, and a rollover of the current $4.2 billion facilities.
“However, technical details are being worked out,” senior government sources familiar with the development told The News on Saturday. “It will take a couple of weeks to have the paperwork completed and signed.” Prime Minister Shehbaz Sharif and his entourage have departed Saudi Arabia, while Finance Minister Miftah Ismail remains in the country to settle the terms of the additional cash package.
The official revealed the key components of the financial package, stating that Pakistan suggested tripling the oil facility from $1.2 billion to $2.4 billion, which the Kingdom of Saudi Arabia agreed to. It was also decided that the $3 billion in current deposits will be carried over for another year, until June 2023.
“Pakistan and Saudi Arabia discussed an extra package of over $2 billion in deposits or Sukuk, and it is probable that even more money would be handed to Islamabad,” government sources said, adding that the entire package’s size would be established after the new funds were completed. Saudi Arabia gave the State Bank of Pakistan with $3 billion in deposits in December 2021, and the Saudi oil facility was operationalized in March 2022, with Pakistan receiving $100 million to acquire oil. During the final term of the PMLN administration, Saudi Arabia offered a $7.5 billion package (2013-18). Saudi Arabia had offered a package of $4.2 billion under the PTI-led government, comprising $3 billion in deposits and a $1.2 billion oil facility for a year, and had connected it to the IMF program.
Now, when Pakistan’s economy is in shambles and the government is facing a balance-of-payments crisis, Saudi Arabia has offered an expanded financial package to the country. The State Bank of Pakistan’s foreign currency reserves have been drained by $6 billion in the previous six to seven weeks, and are now at $10.5 billion. Pakistan needs financial infusions of $9 to $12 billion through June 2022 to avoid further depletion of foreign currency reserves due to a widening current account deficit of $13.2 billion in the first nine months and increasing external loan repayment commitments. Pakistan will have to repay $3 billion in foreign debt payments in the current fiscal year’s fourth quarter (April-June).
The restoration of the IMF programme is regarded critical since the gross external finance demand for the next fiscal year 2022-23 is anticipated to be $35 billion, and the significant funding gap cannot be covered without the program’s support. Independent economists, such as Dr. Ashfaque Hasan Khan, advocate for a ban on the import of luxury automobiles and other non-essential commodities in order to save money.
Miftah Ismail later stated in a tweet, “Prime Minister Shehbaz Sharif and other colleagues have just said their goodbyes at Jeddah Airport, on their route to Islamabad following a short stopover in Abu Dhabi to see Crown Prince Muhammad Bin Zayed. I’m staying in Saudi Arabia to meet with authorities and begin technical discussions.”
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