Economy

Will Saudi Arabia’s assistance to Pakistan resolve its knotty economic issue?

The news that Saudi Arabia is ready to provide assistance to cash starved Pakistan has made headlines. But policymakers’ worries continue as the timing of the assistance to the South Asian nation will be critical to avert a default. Pakistan with just about $4.5 billion foreign exchange reserves, requires assistance from other countries and agencies almost immediately.

Saudi Arabia will undertake a feasibility study expanding its investments to $10 billion in Pakistan while extending the deposits with the State Bank of Pakistan to $5 billion after it rolled over $3 billion in December.
For one, none of the assistance promised by Saudi Arabia is new, though in a recent statement, the Saudi Press Agency (SPA) affirmed its supportive stance towards Pakistan.

“Prince Mohammed bin Salman bin Abdulaziz Al Saud, Crown Prince and Prime Minister, has directed to study augmenting the Kingdom of Saudi Arabia’s investments in the sisterly Islamic Republic of Pakistan, which have previously been announced on August 25, 2022 to reach $10 billion,” SPA said. Pakistan’s Finance Minister Ishaq Dar has been repeatedly assuring the country of Saudi assistance. Clearly, the investment proposal is not new.

Local newspaper Dawn earlier said that though Pakistan may receive planned foreign assurances that will help meet the country’s debt repayment obligations this year. “But what happens in the next fiscal year and after? The unfortunate reality is that we as a nation are not ready to accept the precariousness of our situation and continue to live beyond our means,” it noted.

Pakistan’s foreign exchange kitty currently comprises borrowed money with China providing assistance of $2.3 billion, and Saudi rolling over $3 billion debt. The International Monetary Fund which has halted its financial assistance programme has also provided $1.2 billion.

“Today, each dollar we have is borrowed; we are currently maintaining negative reserves. So we are now at the mercy of certain friendly countries for our survival. If they pump in more dollars, we will survive the crisis and not default,” Dawn quoted Fahad Rauf, head of research at Ismail Iqbal Securities as saying.

 

 

Mahua Venkatesh

Mahua Venkatesh specialises in covering economic trends related to India and the world along with developments in South Asia.

Recent Posts

Baloch Yakjehti Committee releases documentary to honour Karima Baloch’s legacy

On the 4th death anniversary of human rights activist Karima Baloch, the Baloch Yakjehti Committee…

11 hours ago

EAM Jaishankar to visit US from December 24-29

External Affairs Minister S Jaishankar will visit the US from December 24-29 to discuss key…

11 hours ago

Balochistan: Medical students protest campus closure, security crackdown

Students at the Bolan Medical College (BMC) in Balochistan's Quetta entered the 27th day of…

12 hours ago

Climate change, health risks escalate amid surge in PoGB deforestation

The intensifying cutting of trees for firewood in Pakistan-occupied Gilgit-Baltistan (PoGB) is not only worsening…

13 hours ago

India’s retired judges, bureaucrats call for “immediate end” to attacks on minorities in open letter to Bangladesh

A group of retired judges, bureaucrats, Army officials and other civil society members have penned…

14 hours ago

Israel, Slovakia sign historic USD 582 million deal to boost Air Defense capabilities

Israel and Slovakia signed a 2 billion shekel (USD 582 million) agreement on Monday to…

14 hours ago