The State Bank of Pakistan (SBP) on Wednesday announced that Saudi Arabia had extended the term for a deposit of $3 billion to Pakistan for one more year.

“The Saudi Fund for Development (SFD), on behalf of the Kingdom of Saudi Arabia, has extended the term for the deposit of $3bn, maturing on December 5, for another year,” the bank said in a statement posted on social media platform X.

The SBP said the extension was a continuation of the kingdom’s support to Pakistan, adding that it would help maintain foreign exchange reserves and contribute to the country’s economic growth.

The central bank said the deposit agreement was initially signed with the SFD in November 2021, adding that the amount was placed in its reserves on the state’s behalf.

The amount was subsequently rolled over in 2022, after “the issuance of the royal directives that reflect the continuation of the close relationship between the two brotherly countries.”

Saudi Crown Prince Mohammed Bin Salman had directed the SDF in January to study increasing the deposit amount in the SBP to $5bn. Saudi Arabia later deposited an additional $2bn with the SBP in July.

Wednesday’s extension was likely to bolster Pakistan’s case in future talks with the International Monetary Fund (IMF) over the staggered release of $3bn in funding under a standby agreement.

“Certainly the rollover helps solidify the IMF agreement as we move closer to meeting the gross financing needs of the country. This should help pave the way for the next tranche of $700 million as the board approval comes through,” said Dr Khaqan Hassan Najeeb, a former adviser to the ministry of finance.

The IMF has made securing external financing a key condition for the deal struck with Pakistan in July when the country was teetering on the brink of sovereign debt default and a balance of payments crisis.

Financing from several countries, including Saudi Arabia, was critical in getting the deal over the line.

The IMF had initially disbursed $1.2bn under the agreement and after talks in Islamabad, a staff-level agreement was struck that paved the way for the release of another $700m.

The remaining $1.1bn will require further talks in the coming months before the programme comes to an end around March.