KARACHI (Nov 19, 2018): Pakistan has received US$1 billion from Saudi Arabia as part of the US$3 billion pledged by the kingdom to Islamabad for balance of payment support, a spokesperson from the State Bank of Bank (SBP) confirmed on Monday.
The much-needed inflow comes at a time when Pakistan and the International Monetary Fund (IMF) are negotiating a bailout program.
The soft loan from the Kingdom will be reflected on Thursday when the SBP updates its weekly figures for foreign exchange reserves.
SBP spokesman Abid Qamar revealed that Saudi Arabia would release another $2 billion in two equal tranches under an understanding the two sides reached during Prime Minister Imran Khan’s visit to Riyadh last month to attend an international conference titled “Future Investment Initiative”.
The release of the soft loan is expected to put Pakistan in a better position in negotiations with the IMF and it can reach an agreement for a bailout of around $6 billion on softer conditions. The IMF team has been in Islamabad since November 7.
The US$3 billion soft loan from KSA is aimed at stabilizing the fast dwindling foreign currency reserves. Earlier, the reserves had contracted fast and dropped to a four-and-a-half-year low of $7.48 billion by November 9, 2018, according to the central bank.
The loan has improved the country’s capacity to pay for imports and conveniently pay off upcoming external debt installments in the current fiscal year.
Saudi Arabia has agreed to deposit $3 billion for a period of one year as balance of payment support. A one-year deferred payment facility for import of oil, up to $3 billion yearly, would also be provided with this arrangement and remain in place for three years.
During Prime Minister Imran Khan’s visit to Riyadh he met with King Salman bin Abdul Aziz and Saudi Crown Prince Mohammad bin Salman.
Pakistan is also seeking financial packages from China and the UAE.
Independent economists suggest floating Eurobonds to acquire additional $2-3 billion from the international capital markets.
Stock market loses ground
On Monday, the stock market lost ground amid low trading volumes because of a lack of positive triggers.
Investors resorted to profit-taking as they waited for the release of $1 billion by Saudi Arabia under the financial assistance package.
Additionally, market participants were also looking at developments in the UAE as Prime Minister Imran Khan was on his second trip to the Gulf country. However, no announcement regarding financial assistance dampened the overall mood.
US President Donald Trump’s anti-Pakistan comments also kept the market under pressure.
At the end of trading, the benchmark KSE 100-share Index recorded a decrease of 308 points to settle at 41,353.