Saudi Arabia agreed to loan Islamabad $6 billion to help Pakistan stabilize its struggling economy on Tuesday. Pakistan is currently also seeking a critical loan from the International Monetary Fund (IMF).
Acknowledging that Pakistan is facing an $18 billion deficit, the Associated Press reports:
The deal was signed Tuesday by Pakistan’s Finance Minister Asad Umar and his Saudi counterpart, Muhammad Abdullah Al-Jadaan, on the sidelines of an international investment forum underway in Riyadh.
The desperately needed Saudi financial infusion provides Pakistan with an immediate $3 billion to bolster its foreign exchange reserves, according to a foreign ministry statement. Pakistan is to return the $3 billion after one year, but the terms are apparently negotiable.
Pakistan is also to receive $3 billion in oil imports on a buy-now-pay-later basis under the Saudi deal. Currently, Pakistan imports more than 1 million barrels of Saudi oil a day at an annual cost of $3 billion.
The deal is expected to put Pakistan in a better position to negotiate a loan from the IMF, Tariq Yousuf Khan, an economics professor in the southern port city of Karachi, told AP.
Islamabad is seeking an $8 to $11 billion bailout from the IMF, of which the United States is a significant stakeholder.
Long-time allies Islamabad and Riyadh signed the loan agreement as Pakistan’s recently elected Prime Minister Imran Khan attended the high-profile international investment conference despite calls from Pakistani human rights activists to boycott the venue in protest of the killing of journalist Jamal Khashoggi in the Saudi consulate in Istanbul.
Although he condemned Khashoggi’s killing, PM Khan indicated that Pakistan could not afford to pull out from the gathering known as the Future Investment Initiative Conference, according to the Middle East Eye (MEE).
Growing global outrage over the murder of journalist and Saudi government critic Khashoggi has overshadowed the Riyadh conference, expected to run until Thursday.
Several business executives and policymakers have opted not to attend the event, considered the brainchild of Saudi Crown Prince Mohammed bin Salman (MBS).
Pakistani PM Khan, who took office in July, inherited a flagging economy.
Al Jazeera reports:
Before departing for Riyadh, Khan had said his country is “desperate” to shore up its foreign currency reserves, which are at a four-year low of $8.4m.
Pakistan is currently facing a balance-of-payments crisis – with a nearly $18bn deficit, according to the latest figures by the State Bank of Pakistan, while its public sector debt stands at $75.3bn – which is 27 percent of Pakistan’s gross domestic product.
“The immediate concern for our government is to increase exports, bolster our foreign exchange reserves; getting Pakistanis to send remittances through the banking channels,” PM Khan reportedly said at the conference in Riyadh.
“At the same time, clamping down on money laundering, which is a problem in most of the developing world,” he added.