Over the past few months, the Pakistani rupee was hitting a historic low against the dollar, with it closing at Rs174 in the intra-bank trading market at the end of the third week of October. But on Wednesday, the rupee staged a recovery by Rs2.49 and was appreciated to Rs172.78 against the dollar, courtesy of our friends in Saudi Arabia. Prime Minister Imran Khan’s three-day visit to the kingdom bore a fruitful result upon his return as the government announced the $4.2 billion lifeline provided by Saudi Arabia. An oil credit facility of $1.2 billion has also been granted by KSA to aid Pakistan’s economy and ease the pressure on foreign exchange reserves.
According to the details released by the government, the cash deposit will land into the State Bank of Pakistan for three years, while $1.2 billion worth of oil on deferred payments facility will be provided for two years. Prime Minister Advisor on Finance Shaukat Tarin, on Wednesday, had however, mentioned that the government was looking to procure a deal of $1.3 trillion for the oil credit facility. While the desired amount wasn’t achieved, the question running through everyone mind is whether this ‘support’ from the kingdom is going to help improve the cash crunch the economy is currently facing.
If the past is any guide, the economic situation in the country is unlikely to improve. This doesn’t mean that the faltering macroeconomic indicators will not stabilize at all, but the Saudi lifeline has only bought the government some time before they can hash out the revival of the $6 billion IMF programme. As experienced during the start of the ruling PTI’s tenure, the cash support of $6bn from China, Saudi Arabia and the UAE, had only bought time before they had to sign the IMF deal. This time too, it is inevitable for the government to disagree with the fund’s requirements. The government has after all, announced an increase in the base electricity tariff from next month in line with the demands of the IMF. And from the looks of it, while the recent cash deposit from KSA will stabilize the exchange rate, the government is likely to go on with its growth ambitions with just less than two years left for its tenure to end.
It is then safe to say that the economic situation is going to worsen with inflation being recorded at an unprecedented level witnessed in many decades. As for the rupee… ‘ghabrana nahi hai’.