Pakistan will likely secure financial support package from Saudi Arabia

Pakistan will likely secure a multibillion-dollar financial support package from long-time ally Saudi Arabia this month, two sources said, as the country’s ninth review of a $7 billion IMF bailout ran into snags.

The two finance ministry officials said the Saudi package would include deposits boosting the country’s foreign reserves and oil on deferred payments.

Finance Minister Ishaq Dar said earlier he hoped talks with Saudi Arabia would happen soon.

“We are expecting that we will, God willing, get financial support from Saudi Arabia, most likely this month,” one of the senior officials told Reuters, adding it would be around a $4 billion package.

“Some of that package will go to our reserves and the rest is oil and some other commodities on deferred payments,” he said.

“Pakistan has brotherly relations with Saudi Arabia. Both countries have helped each other in times of need,” a finance ministry media official told Reuters, without elaborating or giving any further details.

Pakistan’s economy is facing a balance of payment crisis. The central bank reserves have fallen to $6.7 billion – barely enough for a month of imports.

The fiscal deficit has already touched 1% of the GDP in first quarter of current financial year against 0.7% of the GDP agreed with the IMF.

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With the IMF’s ninth review pending since September, the country has desperately been scrambling to secure financing to meet external payment obligations for the current financial year.

Ahead of the review, Pakistan has been trying to approach allies to seek financial support, and Dar had said that he would expect to get $3 billion from a friendly country.

“The IMF has asked for more information to complete the ninth review,” Dar said on Monday, adding it was “unusual” because Islamabad had met all the requirements already.

He said the IMF wanted Pakistan to explain as to how the country will fund the cost for the reconstruction and rehabilitation of the devastating flood, which this summer was estimated to have insured over $30 billion in losses.

The minister and the IMF have said that discussions continued online over the review. There is no date yet for a physical review by the IMF.

The IMF approved seventh and eighth reviews together in August of Pakistan’s bailout programme agreed in 2019, to allow the release of over $1.1 billion.

Pakistan secured a $6 billion bailout in 2019 that was topped up with a further $1 billion earlier this year.