The Saudi benevolence
It’s a moment of sigh for the economy. Pakistan’s depleting foreign exchange reserves got a shot in the arm as Saudi Arabia agreed to retain its cash tranche of $3 billion for another year. This comes at a time when the economy is in dire straits, and the crunch is felt across the board. The Riyadh deposit tenure was set to mature on Dec 5, and if the rollover had not come it would have sharply plummeted the country’s fortunes, rendering it literally unable to service its debts and imports bills.
This generous eleventh-hour intervention simply underscores the benevolence of the Royal Kingdom, which has been supportive of Pakistan through thick and thin. The $3 billion funds were marshalled last year as former PM Imran Khan sought a credit-line to buckle up reserves, and also signed a $1.2 billion deferred oil supply agreement. Keeping in view the contingency plan, as growth slumped in the wake of rupee’s stampede and sinking exports, the coalition government pleaded with the monarchy to defer withdrawal of their funds earnestly. The compassionate consideration was forthcoming.
Pakistan’s economy is in a straitjacket corner. All it needs is growth and stability. The depreciation of fiat is one of the biggest problems, which has buoyed its total debt to over Rs55 trillion. In a span of one year, debt has soared to a staggering Rs12 billion, and is on a ramp as currency dips lower and lower. This has rendered payable dues to almost 3/4th of the economy or 42% of the national budget. We have been here. This status quo is lethal, and will surely lead to a collapse of the economy.
The way out is an economic diplomacy, wherein the UAE and China should also be persuaded to retain their funds with the central bank, and mobilise commercial banks funnel in investments. Secondly, exports must get a shot and Pakistan scraps its unnecessary imports. Raising of funds from the diaspora in the form of soft bonds, and opting for a litigation-free investment module is indispensable. The UAE and several Far-East Asian economies had thrived on such a hassle-free policy, and Pakistan must follow suit.
Published in The Express Tribune, September 20th, 2022.
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