Riyadh/Islamabad: Saudi Arabia has bailed out Pakistan from a major financial crisis by pledging an additional $3 billion in support.
This will help cover Islamabad’s significant funding shortfall linked to an upcoming debt repayment to the United Arab Emirates (UAE).
This $3 bn is in addition to Riyadh extending the rollover arrangement for an additional $5 billion deposit for a longer period, Pakistan’s finance minister Muhammad Aurangzeb said, as reported by News18.
The partnership between the two nations was cemented last year after they signed a mutual defense pact, treating aggression against either as an attack on both. Pakistan has reportedly sent fighter jets and troops to Saudi Arabia amid the Middle East crisis.
“We can confirm that Saudi Arabia has agreed to a $3 billion deposit with Pakistan to support their balance of payments,” a Saudi Ministry of Finance spokesperson told Reuters.
Pakistan’s foreign exchange reserves, which stood at around $16.4 billion as of March 27 (as compared to India’s nearly $697 billion), are under a lot of pressure as the country is set to repay $3.5 billion to the UAE this month.
This repayment accounts for roughly 18% of Pakistan’s foreign exchange reserves. Under its $7 billion program with the International Monetary Fund, Pakistan aims to raise its foreign exchange reserves to over $18 billion by June.
This will not be possible without the financial backing by Saudi Arabia.
“Senator Aurangzeb said this support comes at a critical time for Pakistan’s external financing needs and would help reinforce foreign exchange reserves and strengthen the country’s external account,” the finance ministry said in a statement.
Islamabad is committed to maintaining foreign exchange reserves “in line with its obligations to markets and under the IMF-supported programme”, the ministry further stated.
Aurangzeb had said on Monday that “all options are on the table,” including Eurobonds, loans and commercial debt.
This is not the first time Saudi Arabia has stepped in to support Pakistan. In 2018, Riyadh unveiled a $6 billion package that included a $3 billion deposit at Pakistan’s central bank and $3 billion in oil supplies on deferred payment.