Saudi generosity

Riyadh has once again rescued Islamabad's fragile balance sheet by doling out an additional $3 billion. This magnanimity has come at a time when Pakistan is facing a severe crunch as it is obliged to pay back $3.5 billion to the UAE which had refused to roll over the same. This hole in reserves was articulately overcome through a strategic intervention by Pakistan which went ahead to stand firm with Saudi Arabia amid the changing regional dynamics, especially in the wake of geopolitical upheavals of the US-Israel against Iran. With the fresh inflows, Saudi Arabia has become the single largest donor to Pakistan with total deposits worth $8 billion.

While this financial tranche has come to bail Pakistan out of an exigent situation, the country also plans to seek another $2.5 billion funding under the IMF's ongoing External Fund Facility. The current programme, featuring $7 billion funding, is likely to mature in September next year. The impact of the Middle East war in the form of rising inflation, slump in economic growth and shortfall in remittances has placed Pakistan in a peculiar situation, calling for out-of-the-box solutions. The Washington-based lender, however, on the premise of Pakistan's remaining SDR facility could agree to another soft loan of up to $2 billion. This would, however, come at a cost – compelling the government to agree to more stringent regulations for constituencies that are already taxed to the core.

The Saudi grace is highly appreciated as the kingdom has not set any specific timeline for debt repayment, enabling the battered economy to have time to plan and stand on its feet. More such bountiful inflows from other friendly countries, especially China, and lending agencies such as ADB, could help Pakistan sail through this troubling tide of imbalance in income and expenditures. It will also help in keeping intact forex reserves of around $16 billion, necessary for three months of imports. The point is: Pakistan must take serious steps to come out of this borrowing syndrome in all sincerity.