Saudi Arabia extends term of $3b deposit for another year

Move will help maintain foreign currency reserves and contribute to economic growth, says SBP

Pakistan's central bank on Wednesday reported that Saudi Arabia had extended the period of its deposits worth $3 billion for another year, a move that would help the country maintain its foreign exchange reserves and strengthen its domestic economy.

“The Saudi Fund for Development (SFD) on behalf of the Kingdom of Saudi Arabia has extended the term for the deposit of USD 3 billion maturing on 05 December 2023 for another one year,” the State Bank of Pakistan (SBP) said in a statement.

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It added that the said amount has been placed with SBP on behalf of Islamic Republic of Pakistan. “The extension of the term of the deposit is a continuation of the support provided by the Kingdom of Saudi Arabia to the Islamic Republic of Pakistan, which will help to maintain the foreign currency reserves of Pakistan and contribute to the economic growth of the country,” the statement added.

It is worth noting that the USD3 billion-deposit agreement was initially signed through the SFD with the SBP in the year 2021 and rolled over subsequently in 2022, after the issuance of the royal directives that reflect the continuation of the close relationship between the two brotherly countries.

The development comes as Caretaker Prime Minister Anwaarul Haq Kakar signed multibillion-dollar investment plans with UAE. He is currently visiting Kuwait, where inking further mega deals were on the cards.

Sindh Governor Kamran Tessori stated on Tuesday that Pakistan is expected to sign investment agreements worth $100 billion with China, Kuwait, UAE, and Turkey over the next six months. The flow of investment would support the rupee's recovery to Rs180-200/$, he claimed.

Pakistan is projected to receive the IMF loan's next tranche of $700 million in December after the Fund's executive board gives its final approval soon.

The approval would unlock another $1.5-2 billion in financing from other multilateral and bilateral creditors, including the World Bank (WB) and Asian Development Bank (ADB).

A leading financial expert stated that the inflows are expected within a couple of months, which would not only boost the country's foreign exchange reserves (held by SBP) but also support the rupee against foreign currencies.

The development would also create some financial space to liberalise imports and support economic activities in the country.