Islamabad: Prior to a crucial IMF meeting this month to ratify a new arrangement, Pakistan’s excruciatingly low foreign exchange reserves received a lift on Tuesday with a $2 billion deposit from Saudi Arabia.
As it struggles to pay off debilitating external debt, the economy is experiencing a balance of payments crisis, and months of political unrest have discouraged foreign investment.
The country is struggling to afford imports as a result of skyrocketing inflation, the rupee’s record low against the dollar, and a country-wide decrease in industrial output.
Ishaq Dar, Pakistan’s finance minister, said in a televised press conference: “Saudi Arabia had announced in the recent past that it would deposit an additional $2 billion dollars in the account of the State Bank of Pakistan — that has been credited to the State Bank.”
It increases the state’s foreign reserves to a total of $6.5 billion, a rise of about 50% from the account balance from the previous week.
According to Standard Capital Securities research analyst Faisal Shaji, the deposit will stabilize Pakistan’s foreign exchange reserves and raise Pakistan’s credit standing on the global market.
“This is another significant and encouraging development for the IMF program. As a result, Pakistan’s currency will gain strength and the stock market would benefit more.
The IMF last week signed a fresh standby agreement worth $3 billion for Pakistan after the government satisfied the final requirements, which included obtaining guarantees of additional financial help from friendly countries. The announcement came after months of protracted discussions.
By the middle of July, the IMF’s executive board will decide whether to approve the standby agreement.
The Covid pandemic, a worldwide energy crisis, and historic floods that swamped a third of the nation last year have all contributed to Pakistan’s economy being stretched to its breaking point as a result of years of financial mismanagement.
According to data released this week, Pakistan’s headline inflation decreased in June for the first time in seven months. This is good news for the government, which is under pressure and must schedule elections this year.