Pakistan Development Fund: Saudi Arabia Islamabad’s ‘friendly Muslim’ lender

The assistance has contributed to the sharp recovery of rupee against dollar.

ISLAMABAD:

The ‘friendly Muslim country’, which loaned $1.5 billion last month to help Islamabad shore up its foreign exchange reserves, meet debt-service obligations and undertake large energy and infrastructure projects, turned out to be Saudi Arabia.

Officials revealed that the lender Finance Minister Ishaq Dar refused to name in his press conference on Wednesday was Pakistan’s all-time friend Saudi Arabia.

The Saudi assistance has contributed to a sharp recovery of the Pakistani rupee, which rose to a nine-month high of 97.40 from 105.40 against the dollar between March 4 and 12, its strongest rally in 30 years.

“On a personal guarantee of the prime minister, Saudi Arabia has given $1.5 billion, which has helped bail out the rupee,” one senior Pakistani government official close to the deal told Reuters, requesting anonymity as he was not authorised to disclose the source and purpose of the funding.

The governor of the Saudi central bank declined to comment, and officials gave no details of the loan terms.

Another top official who is based in Lahore said the money went into an account known as the Pakistan Development Fund set up to channel money from “friendly countries” like Saudi Arabia and the United Arab Emirates.

“We have a promise of a total $3 billion, of which $1.5 billion has been received so far,” the second official said. “Most recently, we got $750 million from the Saudis.”

New fund

Dar announced the creation of the new fund on February 18, the same day Saudi crown prince and deputy prime minister Salman Bin Abdulaziz Al Saud concluded a three-day-visit to Pakistan.

Pakistan’s new army chief, General Raheel Sharif, also met King Abdullah and top Saudi military commanders during a trip to the kingdom two weeks before the new account was set up.

Other high-profile Saudi visitors to Pakistan this year have included Saudi Foreign Minister Saud Al Faisal and Prince Salman bin Sultan, the country’s deputy defence minister.

According to the finance ministry, gross official reserves - including the latest injection of $1.5 billion - stood at $9.52 billion on March 11.

Published in The Express Tribune, March 14^th, 2014.