Saudi support

There has been no panic in the financial markets has, at least, partly to do with the recent Saudi support

Support from Saudi Arabia has come just when it was needed so badly. The $3.2 billion Saudi oil and gas facility on deferred payments — agreed during the visit of Crown Prince Mohammed bin Salman to Pakistan in February — is all set to become operational from July this year. The deferred payment facility, which is to continue for three years, will help ease pressure on the external-sector payments that Pakistan is liable to make. The announcement about the Saudi support comes breaking a weeklong streak of bad news from the economic front — like the fall and fall in the rupee value; the rise and rise in the rates of fuel; their impact on the prices of the items of daily use; and the tumbling of share prices.

Markets are all about sentiments. Sometimes even a single good news does the trick. That there has been no panic in the financial markets of the country for a day or two has, at least, partly to do with the recent Saudi support. Having stayed on the sidelines for several months, bulls have returned to the bourse, with benchmark KSE index gaining more than 2,000 points in just two days. The rupee slide against the dollar has also come to a halt. While the Pakistani currency remained stable against the greenback yesterday, the American currency had shed a rupee the day before. The bullion market too remained spared from the dollar effect, with the value of gold per tola, or 11.6 grams, coming down by Rs600.

The assessment by Fitch Solutions, a US-based global research house, must have been heartening too, for the government. The rating agency expects stability to return to Pakistan’s economy in the wake of what it calls two tough decisions: the 7.5 per cent depreciation in the value of the rupee against the dollar in the past few days; and the 150 basis points hike made by the central bank in the key interest rate last Monday.

Published in The Express Tribune, May 24^th, 2019.

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