• Bilawal conveyed commitment in call with Saudi counterpart
• Kingdom informed about damages caused by unprecedented floods
• Miftah says external financing needs for current fiscal year now complete
• Finance ministry official says too early to clarify nature of investment

ISLAMABAD: The Saudi king has directed his government to invest $1 billion in Pakistan “in confirmation of the kingdom’s support of the Pakistani economy” and its people, a report from the Saudi Press Agency (SPA) said on Thursday.

The investment commitment was conveyed to Foreign Minister Bilawal Bhutto-Zardari during a phone call with his Saudi counterpart Prince Faisal bin Farhan.

The directive from King Salman bin Abdulaziz came a day after the Qatari government said it would invest $3bn in Pakistan.

Mr Bhutto-Zardari tweeted earlier on Thursday about the interaction with Prince Farhan and welcomed the investment commitment. He also said he had briefed his Saudi counterpart on the flood situation in Pakistan.

The SPA report said the two leaders also discussed “strong Saudi-Pakistani relations and ways to boost them, as well as the regional and international issues of common interest”.

Saudi Arabia and the United Arab Emirates (UAE) have earlier indicated to provide $1bn each in oil purchase financing.

However, it is not clear whether the Saudi announcement of $1bn is an investment or the deferred oil facility for Pakistan. “It is too early to clarify the nature of the investment,” a finance ministry official said.

The announcement from the UAE to invest $1bn in Pakistan came on Aug 5, followed by Qatar’s intention declared on Wednesday to invest $3bn.

A major IMF condition for Pakistan was to secure $4bn financing commitment from friendly countries.

Finance Minister Miftah Ismail told Dawn he had also received the confirmation of the investment from Saudi Arabia. “We welcome the Saudi Arabia investment in Pakistan,” he said.

With the kingdom’s investment ann­o­u­ncement, all prior IMF conditions had now been met, he said: “We have managed our external financing requirements now. Our external needs are now complete for the fiscal year 2023.”

The move follows the completion of the $4 billion in bilateral financing from four friendly nations and would pave the way for immediate disbursement, expe­c­ted to be in Pakistan’s account before the end of working hours on Aug 31.

The Fund’s executive board would meet on Aug 29 to take up Pakistan’s case for approval of the completion of the seventh and eighth reviews of the Extended Fund Facility (EFF), besides a $1bn increase in the size of the programme to $7bn and extend the bailout programme to August next year.

The IMF board’s clearance was expe­c­ted to reverse Pakistan’s continuously depleting foreign exchange reserves, strengthen the rupee and support the balance of payments.

With an increase in the petroleum development levy on oil products on July 31, the IMF publicly confirmed that Pakistan had completed all prior actions to revive the loan programme, but the Fund linked its board’s approval of a $1.18bn instalment to the confirmation of $4bn additional inflows from the four friendly countries.

The rupee quickly recovered against the dollar after that, rising from about Rs240 to around Rs214 in the interbank market. However, the trend has now reversed and the rupee once again seems to be under pressure. It closed at 219.41 to the dollar on Thursday, according to the central bank.

On July 13, the IMF announced its much-awaited staff-level agreement with Pakistan, a nine-month extension in the loan programme and a $1bn increase in the size of the bailout package to $7bn, including an upfront disbursement of about $1.18bn.

However, it linked its board approval to a series of prior actions, which the Pak­istani government has fulfilled since then.

Published in Dawn, August 26th, 2022