Saudi Arabia extends $3 billion deposit to Pakistan for another year
Saudi Arabia has extended the term of its $3 billion deposit with the State Bank of Pakistan for another year, the central bank announced on Thursday. The deposit, which was set to mature on December 5, 2024, is being renewed through the Saudi Fund for Development (SFD) as a gesture of continued support to Pakistan’s economy.
The decision follows a meeting between Prime Minister Shehbaz Sharif and Saudi Crown Prince Mohammad Bin Salman during the “One Water Summit” in Riyadh earlier this week. Both leaders discussed strengthening economic, trade, and investment ties, expressing satisfaction over the progress of Saudi investments in Pakistan.
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The State Bank of Pakistan noted that the extension aims to bolster the country’s foreign exchange reserves and contribute to economic growth. “This support reflects the close relationship between the Kingdom of Saudi Arabia and the Islamic Republic of Pakistan,” the central bank said.
The original deposit agreement with the SFD was signed in 2021 and has been rolled over in subsequent years. It aligns with several recent agreements aimed at boosting trade and investment, including $2 billion worth of memorandums of understanding (MoUs) signed in October during a Saudi delegation’s visit to Pakistan.
These agreements include a $70 million investment in Pakistan’s agriculture sector, plans for semiconductor chip manufacturing, a white oil pipeline project, the development of a textile industry, and initiatives in hybrid power and transformer manufacturing. Other collaborations involve cybersecurity, the export of spices and vegetables, and the establishment of facilities for surgical and dental equipment.
The economic assistance comes at a critical time for Pakistan, which narrowly avoided default in 2022 with an IMF bailout. The country has relied on external financial support to meet its obligations, including contributions from Saudi Arabia and the United Arab Emirates.
In September, the IMF approved a $7 billion Extended Fund Facility (EFF) for Pakistan, providing an initial $1.1 billion tranche. While the bailout has stabilized the economy, the accompanying reforms have led to inflation and increased costs of energy, gas, and fuel.
The renewed Saudi deposit is expected to provide much-needed stability to Pakistan’s foreign reserves as the country continues to navigate its economic challenges.
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