Prime Minister Imran Khan meets Saudi Crown Prince Mohammed bin Salman on the sidelines of the Middle East Green Initiative Summit in Riyadh. Photo courtesy PID
P.M. Khan thanks Saudi Crown Prince for support in boosting foreign exchange reserves, financing oil products
The Saudi Fund for Development on Tuesday announced it is depositing $3 billion in the State Bank of Pakistan (SBP) to boost its foreign exchange reserves, as well as supplying $1.2 billion to finance Islamabad’s oil products trade this year.
“This will help ease pressures on our trade and forex accounts as a result of global commodities price surge,” Energy Minister Hammad Azhar said on Twitter as he confirmed the news of the deferred payments facility for petroleum products and the central bank deposit.
Adviser to the P.M. on Finance Shaukat Tarin has been claiming, for several months, that Saudi Arabia had agreed to provide oil on deferred payments to Pakistan. However, he had claimed the quantum would be $2 billion, not the announced $1.2 billion.
The Saudi announcement about the new aid package follows a Monday meeting between Prime Minister Imran Khan and Saudi Arabia Crown Prince Mohammed bin Salman in Riyadh, where the premier was attending the Middle East Green Initiative Summit. Earlier this year, in a separate visit, the prime minister had requested the kingdom to resume the deferred oil facility to Pakistan for an extended period.
Thanking Saudi Crown Prince Mohammad bin Salman for the support, the prime minister on Wednesday said the Gulf kingdom had a tradition of helping Pakistan. “KSA [Kingdom of Saudi Arabia] has always been there for Pakistan in our difficult times, including now when world confronts rising commodity prices,” he said in a posting on Twitter.
Earlier, the Gulf kingdom had provided a $6 billion financial package in 2018, comprising $3 billion deposits into the State Bank of Pakistan, and $3 billion for oil facility on deferred payment over the next three years. The oil facility went into operation on July 2019, with the first year’s bill to be paid monthly, and the second year onwards through deferred payments.
However, the oil facility was suspended in 2020 when ties between Pakistan and Saudi Arabia frayed; the Gulf kingdom also withdrew, ahead of schedule, the $3 billion it had deposited into the central bank. At the kingdom’s demand, Pakistan was forced to secure a loan from China to repay the deposit.