Saudi Arabia (KSA) has extended the duration of a $3 billion deposit made to the State Bank of Pakistan (SBP) through the Saudi Fund for Development (SFD).
Saudi Arabia deposited the money in Pakistan’s central bank late last year as a loan to shore up the cash-strapped country’s reserves.
“The SFD extended the term for the deposit provided by the Kingdom of Saudi Arabia in the amount of $3 billion to the SBP,” the State Bank of Pakistan cited in a statement.
The Pakistan central bank’s reserves stood at $7.5 billion as of 25th November 2022. “Too low to cover more than a month of imports, the reserves together with a widening current account deficit have threatened a balance of payment crisis for the South Asian economy, which has to make another $1 billion bond payment next week,” as per the reports.
The extension of the deposit comes in continuation of the support extended by the Saudi Government to Pakistan’s foreign reserves to confront the economic repercussions in the aftermath of COVID-19.
“The deposit aimed to shore up the foreign currency reserves in the Bank and help Pakistan in facing the economic repercussions of the COVID-19 pandemic; it, furthermore, contributed to meet external sector challenges and achieve sustainable economic growth for the country,” remarked SBP.
The extension of the $3 billion deposit is considered crucial for the cash-starved South Asian economy, which has seen its foreign exchange reserves deplete in recent months. “Further, the extension will help Pakistan to meet external sector challenges and achieve sustainable economic growth,” as per the statement.
The $3 billion-deposit agreement was signed through the SFD with the central bank of Pakistan in November last year, after the issuance of royal directives that reflect the continuation of the close relationship between the two countries.