KARACHI – Pakistan and Saudi Arabia Monday signed an agreement under which Riyadh will place $3 billion with the State Bank of Pakistan (SBP) for a year and will keep it rolling until Islamabad reach a deal with the International Monetary Fund (IMF).
The agreement was signed by Saudi Fund for Development (SFD) Chief Executive Officer Sultan Bin AbdulRahman Al-Marshad and SBP Governor Dr. Reza Baqir in Karachi.
Under this deposit agreement, SFD shall place a deposit of USD 3.0 billion with SBP. The deposit amount under the agreement shall become part of SBP’s Foreign Exchange Reserves. It will help support Pakistan’s foreign currency reserves and contribute towards resolving the adverse effects of the COVID19 pandemic.
“The deposit agreement reflects the strong and special relationship between the Kingdom of Saudi Arabia and Pakistan and will further augment the economic ties between the two brotherly countries,” read the joint press release.
Last month, the Kingdom agreed to revive the financial support to Pakistan during the visit of Prime Minister Imran Khan.
Last week, the federal cabinet approved the agreement to keep $3 billion aid from Saudi Arabia in SBP. The Cabinet endorsed the deal via a circulation summary Saturday.
The Saudi government had promised to maintain a reserve of $3bn at the State Bank. According to the agreement, the aid will remain in the State Bank’s deposit account for a year.
“The SBP has finalised all arrangements and now everything is in place and the amount of the agreed deposit will be received within the next couple of days,” top official sources confirmed.
Pakistan would, however, pay the Saudi government a 4% yearly profit on this sum, sources confirmed.
The proposed agreement with the Saudi government was forwarded to the Ministry of Law and the Office of the Attorney General. The Attorney General’s Office and the Ministry of Law reached an agreement on a draft.
Following the legal opinion, a copy of the agreement was submitted for approval to the federal cabinet. The cabinet approved the State Bank’s retention of $3 billion from the Saudi Development Fund.
Pakistan’s entire liquid foreign reserves, according to the central bank, stood at $22.773 billion on November 19, 2021.
The numbers indicate that the SBP held $16.254 billion in foreign reserves, while commercial banks kept $6.519 billion in net foreign reserves.
The SBP’s reserves declined by $691 million to $16.254 billion during the week ended November 19, 2021, primarily owing to external debt repayments.