Saudi Arabia has confirmed renewing its $3 billion deposit with the State Bank of Pakistan (SBP) for a year, the central bank announced on Sunday.
“Saudi Fund for Development (SFD) has confirmed rollover of $3bn deposit maturing on 5 Dec 22 for one year,” the bank said on its official Twitter handle.
The deposit is placed with the SBP and is part of its foreign exchange reserves. “This reflects continuing strong and special relationship between KSA and Pakistan,” it added. The agreement for the deposit was originally signed in November 2021 with an aim to improve the SBP’s foreign exchange reserves.
The agreement was signed by SFD Chief Executive Officer Sultan Bin Abdul Rahman Al-Marshad and former SBP governor Dr Reza Baqir at the State Bank in Karachi. Last month, the kingdom announced investing $1 billion in Pakistan as part of its plan to help revive the country’s economy, which has been reeling from one crisis to another in the last few months.
“The Custodian of the Two Holy Mosques, King Salman bin Abdulaziz Al Saud, issued a directive to invest $1 billion in Pakistan, in confirmation of the kingdom’s support of the Pakistani economy and the Pakistani people,” the Saudi state media had announced last month. It is not clear where and when the latest investment would be made.
Saudi Arabia is one of the key countries that Pakistan has been seeking financial support from. The country has multiple times extended support to Pakistan. In the last week of October 2021, Saudi Arabia had agreed to revive its financial support to Pakistan, including about $3 billion in safe deposits and $1.2 billion worth of oil supplies on deferred payments. Pakistan’s foreign reserves declined by $176 million to stand at $8.624 billion due to external debt and other payments during the week ended September 9, 2022, data by the central bank showed.
Pakistan can cover import payments for only 40 days, given its low reserves, which has led to added pressure on the rupee. Over the past couple of months, the rupee has plummeted to historic lows against the US dollar.
“Continuity of SFD deposit of $3 billion will help support Pakistan’s foreign currency reserves,” Dr Khaqan Najeeb, former adviser to the Finance Ministry, told a media outlet. “The extension of the deposit does not increase the current level of foreign exchange reserves of the SBP, which stand at a critical level of $8.62 billion.” He said the increase in Pakistan’s reserves is critical for meeting its balance-of-payments needs and to stabilise the currency market.
