In October 2022, Prime Minister Shehbaz Sharif said that Saudi Crown Prince Muhammad Bin Salman would visit Pakistan and bring along $10 billion to establish an oil refinery; however, the trip was postponed for undisclosed reasons, and the money never came in. Recently, the new Chief of the Army Staff, General Asim Munir, visited Saudi Arabia and met with the crown prince in the holy city of Madina. According to reports, Saudi Prince Muhammad Bin Salman has ordered the Saudi Development Fund to think about increasing the deposit amount in the State Bank of Pakistan to $5 billion from $3 billion. Saudi Arabia is ready to help its sister state of Pakistan in this difficult situation.
We hope that this act of generosity from Saudi Arabia will ease some of Pakistan’s financial problems, but it is unlikely to solve all of them. Reason: Pakistan’s issues are countless and permanent. Pakistan has now become known for its begging and requests for aid from friends and allies. At one point, even this aid and investment will stop pouring in and the country should fix itself before such a thing happens. The crisis that the country is currently facing can be blamed for this, the previous and all of the governments that came before. It is not on the shoulders of a single person or government but on the collective policies that have been made over the years. Due to its dependence on foreign aid during the years of various dictatorships and democratic governments, Pakistan never developed a solid foundation for itself, and now that has come back to bite it.
Pakistan is in a difficult financial situation at the moment. The cash crunch has led to the depletion of reserves to an eight-year low of $5.576 billion during the week ending December 30, 2022. Due to this decline, the government was unable to repay its foreign debts without taking out new loans from allies. For the repayment of external debt, the SBP’s foreign exchange reserves lost $245 million over the course of the week. The PMLN-led coalition government, which is under a real threat of default, is most concerned about how to service its foreign debt. There have been numerous unsuccessful attempts to pick up the conversation with the IMF about releasing the next tranche. The local currency has already been significantly devalued in comparison to the US dollar and other major currencies due to the declining reserves. The SBP’s foreign exchange reserves decreased by $11 billion, from $16.6 billion in January 2022 to $5.6 billion today.
Successive governments must develop and implement policies that benefit the country as a whole, rather than just their political agenda and the number of votes they receive. In the years to come, Pakistan must be prepared to face challenges from crashing financial markets, oil price booms, and climate disasters, among other things. Without sound policies and proper implementation, the country is likely to collapse, and no friend or ally will come to its aid then. This round of aid, investments, and loans should be treated as last Pakistan will ever get.