Pakistan currency touches all-time low after Saudi, IMF look the other way

Aid from Saudi Arabia into Pakistan is thinning amid changing global geopolitical order. The West Asian nation is now changing its stance by clamping up on offering “blank cheque” aid to Islamabad.

Even as cash starved Pakistan recently received financial assistance from China, concerns among its policymakers are increasing with Saudi Arabia’s reluctance to offer help. Pakistan’s external debt obligations over the next three years have risen to $73 billion while the country’s less than $5 billion in foreign exchange.

Amid the deepening economic crisis, the Pakistani rupee dropped to 288 against the US dollar today, marking a new low.

Pakistan’s local news organisation Samaa said that Saudi change in attitude could have far-reaching implications for Pakistan’s economy since the country is heavily reliant on foreign aid and loans to keep its economy afloat. “With Saudi Arabia taking a more assertive stance in its leadership, it appears that the days of blank checks are over,” it said.

After the International Monetary Fund (IMF), Saudi Crown Prince Mohammed bin Salman is also unwilling to lend to Pakistan until it put in place basic structural reforms including elimination of subsidies and privatizing of state-owned companies.

The country’s inflation surged to 35.37 per cent in March, prompting its central bank—the State Bank of Pakistan to raise interest rates by a whopping 100 basis points—the highest quantum ever to be implemented in a single stroke.

All eyes are now on Pakistan’s Finance Minister Ishaq Dar who is slated to visit the US next week amid ongoing negotiations with the IMF for resumption of the financial aid package.

The country’s Prime Minister Shehbaz Sharif earlier admitted that countries with which Islamabad has traditionally shared good relations have also become wary in providing loans further.

“Today, when we go to any friendly country or make a phone call, they think that we have come [to them] to beg for money,” Sharif said late last year while addressing a lawyers’ convention.

Apart from Pakistan other countries including Egypt, Jordan and Lebanon will also be impacted by this decision of Saudi Arabia.

Also read: Many in Pakistan dread IMF terms for loan as inflation soars to 35%