Saudi Arabia has agreed to provide Pakistan $3 billion in foreign currency support for a year to address its balance-of-payments crisis, the government announced on Tuesday.
The Kingdom has also agreed to provide Islamabad a one-year deferred payment facility for import of oil, worth up to another $3 billion.
The agreements in this regard were signed during the visit of Prime Minister Imran Khan to Saudi Arabia to attend the Future Investment Initiative (FII) conference, a trip he undertook on the invitation of King Salman bin Abdul Aziz Al-Saud.
According to a press release issued by the government, several far-reaching decisions on bilateral economic and financial cooperation were reached during the discussions held between Pakistani and Saudi officials:
- It was agreed that Saudi Arabia will place a deposit of US $3 billion for a period of one year as balance-of-payment support. A memorandum of understanding (MoU) was signed in this regard between Finance Minister Asad Umar and his Saudi counterpart Muhammad Abdullah Al-Jadaan.
- It was also agreed that a one-year deferred payment facility for import of oil, up to $3 billion, will be provided by Riyadh. This arrangement will be in place for three years, after which it will be reviewed.
- Saudi Arabia also "confirmed its interest" in investing in a petroleum refinery in Pakistan. An MoU for this project will be signed after obtaining the cabinet's approval.
- The Kingdom also expressed interest in the development of mineral resources in Pakistan. In this regard, the federal government will hold consultations with the Balochistan government, following which a Saudi delegation will be invited to Pakistan to finalise matters.
During the visit, Prime Minister Khan held "detailed bilateral discussions" with the Saudi monarch and Crown Prince Mohammed bin Salman, a foreign ministry handout said.
Prince Mohammed agreed to the premier's suggestion for reduction of Saudi visa fee for Pakistani workers, "which is a significant step towards enhancing Pakistan’s workforce in [the Kingdom], as well as facilitating travel of people from both countries".
During his address at the investment conference in Riyadh, Prime Minister Khan had confirmed that Pakistan was also in talks with the International Monetary Fund (IMF) over a bailout.
However, Khan has in recent days sought to avoid going to the IMF and still wants to at least reduce the size of any bailout by appealing to “friendly countries” for bilateral financial support.
The prime minister's attendance at the FII comes as leading policy-makers and corporate chiefs shunned the conference in response to the death of journalist and Saudi government critic Jamal Khashoggi at the Kingdom's consulate in Istanbul — a scandal that has tipped Riyadh into a diplomatic crisis.
The Saudi pledge comes days after the State Bank warned inflation could double in the coming year — hitting 7.5 per cent — while the country's growth target rate of 6.2pc would likely be missed.
Finance Minister Umar had on Saturday warned the country was fast heading towards bankruptcy. However, he promised to end the country's reliance on IMF bailouts to shore up the shaky economy, as officials prepared to negotiate a new loan.
An IMF team is set to arrive in Pakistan in early November to begin negotiations.