ISLAMABAD: Pakistan received an advance confirmation from Saudi Arabia on Sunday to roll over its existing $3 billion deposit maturing in December and an assurance from the International Monetary Fund (IMF) for its support to flood relief and reconstruction efforts.

The two simultaneous ann­­ouncements are likely to support a market sentiment batt­ered by the continuou­sly declining exchange rate, although both would not have any immediate bearing on the State Bank of Pakis­tan’s (SBP) foreign exchange reserves of $8.6bn as of Sept 9. The Saudi loan rollover is part of the financing needs for the current year under the IMF programme.

Esther Perez Ruiz, the IMF resident representative to Pakistan, said the Fund would “work with others in the international community to support, under the current programme, the authorities’ relief and reconstruction efforts and especially their ongoing endeavour to assist those affected by the floods while ensuring sustainable policies and macroeconomic stability”.

In a statement, she said the IMF was deeply “saddened by the devastating impact” of the floods in Pakistan and “our sympathies go to the millions of victims of the floods”.

The statement came ahead of Prime Minister Shehbaz Sharif’s visit to the United States to attend the Sept 19-22 UN General Assembly session.

UN Secretary General António Guterres had already appealed to the international community for urgent financial support to Pakistan while concluding a two-day visit to the flood-ravaged areas and himself witnessing “great heights” of human tragedy caused by climate change. Pakistan, responsible for less than 0.1pc of the world’s carbon dioxide emissions, is among the top 10 countries affected by climate change.

Separately, the SBP announced that the Saudi Fund for Development (SFD) had “confirmed the rollover of $3bn deposit” for one year. The existing deposit was secured in November 2021 and was due to expire on Dec 5 this year. “Deposit is placed with SBP and is part of its forex reserves,” the central bank said, attributing this to the “continuing strong and special relationship between the Kingdom of Saudi Arabia and Pakistan”.

Under the deposit agreement between Saudi Arabia (represented by the SFD) and Pakistan (represented by the SBP) in November last year, a deposit of $3bn

was placed with the SBP to help support Pakistan’s foreign currency reserves. It involves an interest rate of 3.8 per cent.

The recent devastating floods and heavy rainfalls have affected more than 33 million people, and caused an estimated infrastructure, crops and livestock loss of almost $20bn that may need almost $30bn for rehabilitation. More than 1,560 people have lost their lives.

Pakistan secured $1.17bn from the IMF late last month after it agreed to the lender’s tough conditions to revive a programme that derailed after the previous PTI-led government reneged from its commitments for reforms and instead announced heavy fuel and energy subsidies and offered a money-whitening tax amnesty.

Since then, the government made an unprecedented increase in electricity and petroleum prices over a short period, imposed more taxes and also agreed to more utility price shocks in future under a straightjacket implementation plan involving over 53pc increase in gas rates, the revival of general sales tax on petroleum products and withdrawal of more subsidies.

WHO raises alarm on ‘second disaster’

Meanwhile, the World Health Orga­nisation (WHO) has raised the alarm about a “second disaster” in the wake of the unprecedented flooding in Pakistan. “I am deeply concerned about the potential for a second disaster in Pakistan: a wave of disease and death following this catastrophe, linked to climate change, that has severely impacted vital health systems leaving millions vulnerable,” Tedros Adhanom Ghebreyesus, WHO’s director general, said in a statement.

“The water supply is disrupted, forcing people to drink unsafe water,” he said. “But if we act quickly to protect health and deliver essential health services, we can significantly reduce the impact of this impending crisis.” He also noted that around 2,000 health facilities have been fully or partially damaged in Pakistan and urged donors to continue to respond generously.

Published in Dawn, September 19th, 2022

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