KARACHI: Saudi Arabia has agreed to extend the $3 billion deposit held in the State Bank of Pakistan (SBP) for another year, providing critical support to Pakistan’s foreign exchange reserves.
The SBP announced on Thursday that the Saudi Fund for Development (SFD), on behalf of the Kingdom of Saudi Arabia, has rolled over the deposit, which was set to mature on Dec 5, 2024 (yesterday). The deposit will now remain with Pakistan for another year.
The extension comes as a relief for the country’s economic managers, who face a daunting $26bn debt servicing obligation in the current fiscal year.
Officials had recently acknowledged that some friendly nations were reluctant to roll over $14bn in loans. However, the government is actively negotiating similar agreements with China and the UAE to secure further financial stability.
SBP-held forex reserves jump by a half since the beginning of 2024
The $3bn deposit, initially agreed upon in 2021 and rolled over in 2022 and 2023, is seen as a continuation of Saudi Arabia’s support for Pakistan’s economy.
The extension would help strengthen Pakistan’s foreign exchange reserves and contribute to economic growth and development, the SBP said in a statement.
The SBP-held foreign exchange reserves have been steadily increasing, with the central bank reporting a $620 million rise in the week ending Nov 29, 2024. Of this increase, $500m came as an inflow from the Asian Development Bank (ADB).
As of Nov 29, SBP reserves stand at $12.038bn, marking an increase of 47.5 per cent ($3.877bn) since the beginning of the year.
Total reserves, including those held by commercial banks, rose by $544m to reach $16.62bn during the week. Of this, commercial banks hold $4.581bn, according to the SBP.
The consistent growth in reserves is instilling confidence among financial experts, exporters and market participants. Analysts note that the stable exchange rate observed over the past four months is directly linked to the improved reserve position. Exporters have also shown greater confidence by selling most of their export proceeds.
The government aims to achieve a reserve target of $13bn for the current fiscal year.
Published in Dawn, December 6th, 2024
