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Saudi Arabia announces cash, oil boost for Pakistan's ailing economy

Published October 27,2021

Saudi Arabia will deposit 3 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.

The assistance was agreed as Pakistan's Prime Minister Imran Khan's last weekend visited Saudi Arabia and met with Saudi Crown Prince Mohamed bin Salman, Pakistan's Foreign Ministry said.

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.

The currency depreciation coupled with a record increase in energy prices pushed the inflation beyond 10 per cent last week, triggering political protests and the continuous decline of main index on the stock exchange.

Saudi Arabia and Pakistan, both Sunni-majority Muslim countries, have been allies for decades, but the relations were strained in recent years.

Riyadh announced the same package for Islamabad in 2018, but it did not materialize after Pakistan warmed up to Turkey and Malaysia, two Islamic nations Saudis consider rivals.