The Pakistan's central bank on Friday reported that the Kingdom of Saudi Arabia (KSA) had extended the period of its deposits worth $3 billion, shoring up the country's foreign exchange reserves and strengthening domestic economy.
Reports on the expected rollover of the deposits were circulating in the financial market.
Accordingly, the extension in deposit period helped the Pakistani rupee to close unchanged at Rs223.69 against the dollar on a day-to-day basis in the interbank market on Friday.
According to a statement issued by the State Bank of Pakistan (SBP), "In implementation of the directives of the King Salman bin Abdulaziz Al Saud… the Saudi Fund for Development (SFD) extended the term for the deposit provided by the Kingdom of Saudi Arabia in the amount of $3 billion to the State Bank of Pakistan."
1/2 Implementing directives of the Custodian of the Two Holy Mosques, King Salman bin Abdulaziz Al Saud - may Allah protect him; the Saudi Fund for Development @SaudiFund_Dev has extended the term for deposit, $3bn, provided by Kingdom of Saudi Arabia to State Bank of Pakistan.— SBP (@StateBank_Pak) December 2, 2022
2/2 Extension of term of the deposit is a continuation of support provided by the government of Kingdom of Saudi Arabia to Islamic Republic of Pakistan. Agreement was signed through SFD with SBP in Nov21. See PR: https://t.co/cjldEhyfX9— SBP (@StateBank_Pak) December 2, 2022
It, however, remained unknown as for how long the period of the deposits was extended.
It is generally perceived that the period had been extend for one-year; till November 2023.
The extension of the term of the deposit is a continuation of the support provided by the government of the Kingdom of Saudi Arabia to the Islamic Republic of Pakistan, as "the deposit aimed to shore up the foreign currency reserves in the bank (SBP) and help Pakistan in facing the economic repercussions of the Covid-19 pandemic; it, furthermore, contributed to meet the external sector challenges and achieve sustainable economic growth for the country," the statement said.
It is worth noting that the $3 billion deposit agreement was signed through the SFD with the SBP in November 2021, "after the issuance of the royal directives that reflect the continuation of the close relationship between the two countries."
The rollover of the deposits reduced the size of total foreign debt repayment and debt serving by $3 billion to $23.3 billion over the next 12 months (November 2022 to October 2023).
The central bank reported earlier this week that the country was scheduled to repay a total of $26.3 billion on account of foreign debt and debt services over the next 12 months.
Besides, Finance Minister Ishaq Dar wrote a letter to the central bank of China to roll over $6.3 billion.
Pakistan made arrangements of $32-34 billion to repay foreign debt and finance current account deficit during the current fiscal year 2023 (July 2022 to June 2023).
The SBP's foreign exchange reserves stood at $7.5 billion at present. They stood at $20 billion in August 2021.
The depletion in the reserves created a perception that the country may default on international payments.
Dar and SBP Governor Jameel Ahmad, however, reiterated that the country would not default and continue to make all payments on time.
PM thanks Saudi Arabia
Prime Minister Shehbaz Sharif on Friday thanked the leadership and the government of Saudi Arabia for extending the term of the deposit of $3 billion with the State Bank of Pakistan.
Welcoming the gesture, the prime minister particularly thanked Saudi Prime Minister and Crown Prince Mohammed bin Salman Al Saud, saying that Pakistan greatly valued his love for Pakistan.
"Once again, Saudi Arabia has played the role of an elder brother, and manifested its unprecedented love for Pakistan," he remarked in a statement.
The prime minister said the extension in the term of $3 billion deposit would help improve Pakistan's economic situation.
He said the country's economic independence was the government's top agenda, which required political stability and the Charter of Economy.
In a tweet, the SFD said the extension in term was made in pursuance of the directives of the Custodian of the Two Holy Mosques and crown prince in support of Pakistan's economy.
In implementation of the directives of the Custodian of the Two Holy Mosques & HRH Crown Prince & Prime Minister & in support of the economy of the Islamic Republic of #Pakistan; #SFD extends the term of the $3 billion deposit provided by #KSA to the @StateBank_Pak. pic.twitter.com/0VACcJo2m9— الصندوق السعودي للتنمية (@SaudiFund_Dev) December 2, 2022
"The extension of the term of the deposit, the agreement of which was signed in Nov 2021, is a continuation of the support provided by Saudi Arabia to Pakistan, as it contributed to meet external sector challenges and achieve sustainable economic growth for the country," the SFD said.
(With input from APP)
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