Stocks surge as Riyadh rolls over $3b deposits

Move expected to pave way for revival of IMF loan programme


Irshad Ansari August 15, 2022
PHOTO: AFP

ISLAMABAD:

As soon as the Kingdom of Saudi Arabia on Monday agreed to roll over its $3 billion deposits with the State Bank of Pakistan – a move that is expected to help revive the stalled International Monetary Fund (IMF) loan programme – the stock market witnessed a bullish trend and the rupee managed to gain ground against the dollar.

The KSE-100 index increased by 700 points to close above the 43,000 points level, while the rupee gained 1.51 against the dollar to end the trading day at Rs213.98.

According to the Ministry of Finance, the development came as Prime Minister Shehbaz Sharif and Saudi Arabia’s Crown Prince Mohammed bin Salman bin Abdulaziz Al-Saud, in a telephonic conversation, expressed their resolve to further strengthen their strong, longstanding fraternal ties.

The two leaders exchanged views on issues of mutual interest, the Prime Minister Office said in a statement.

After their conversation, reports of Saudi Arabia agreeing to renew the safe deposit came out.

Sources in the finance ministry said that Saudi Arabia has decided to extend the $3 billion safe deposit period for another year.

“The 3% interest will also be paid on the $3 billion safe deposit, while Pakistan will have to return the money immediately if there is a risk of default,” they said, adding that the safe deposit period will likely be extended till December 2023. Earlier, the maturity period was November 2022.

According to the sources, the money kept under the safe deposit will not be able to be used, while Minister of State for Finance Ayesha Ghaus Pasha, said: “The one-year extension agreement with Saudi Arabia will be concluded soon.”

According to the minister, the kingdom will also provide $100 million loan for oil per month, adding that oil will be received from Saudi Arabia in 10 months on deferred payments of $1 billion.

Saudi Arabia extended support multiple times to Pakistan. It pledged $4.2 billion in assistance when former prime minister Imran Khan visited the kingdom in October. That included a deposit of $3 billion with the SBP to help shore up its reserves and a facility to finance oil derivatives trade worth $1.2 billion during the year.

The kingdom discussed extending the term of its $3 billion deposit with Pakistan when Prime Minister Shehbaz met Crown Prince Mohammed bin Salman in May.

The matter is crucial because, while the IMF is due to lend Pakistan $1.2 billion, this would be insufficient for Premier Shehbaz’s government to avoid a debt default.

The aid comes as the IMF has been looking to assess Saudi Arabia’s commitment to financing Pakistan before the multilateral lender disburses fresh funds to it.

Pakistan secured a staff-level agreement with the IMF last month to revive its bailout package. The IMF board will approve release of the cash if there is no risk of default.

Earlier this month, Chief of Army Staff (COAS) General Qamar Javed Bajwa spoke with the authorities of the United Arab Emirates and Saudi Arabia to discuss the IMF programme.

The extended fund facility worth $1.2 billion with the IMF was discussed with the friendly countries, including the upcoming executive board meeting of the IMF which is expected to ratify the loan programme.

Read: Friendly countries to plug $4b financing hole

Before that, the army chief also called US Deputy Secretary of State Wendy Ruth Sherman seeking help so that Islamabad could secure an early dispersal of $1.2 billion in funds under an IMF programme.

During the conversation with Saudi crown prince, Shehbaz conveyed his deep respects to the custodian of the two Holy Mosques, King Salman bin Abdulaziz, the PM Office said.

During the telephone call, the crown prince congratulated the prime minister and the people of Pakistan on the 75th anniversary of Pakistan’s independence. The crown prince also conveyed best wishes for the continued progress, prosperity and development of Pakistan.

The prime minister and the crown prince reviewed the progress made on the decisions taken by the two sides during the visit of Shehbaz in April 2022. They resolved to expedite the ongoing cooperation in investment, energy and trade.

Recalling the support extended by Saudi Arabia to Pakistan in times of need, the prime minister thanked the crown prince for the economic and development support provided to Pakistan in recent times. Shehbaz reiterated his invitation to the crown prince for a visit to Pakistan, which he accepted.

(With input from agencies)

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