Pakistan gets Saudi’s nod for additional USD 2 billion funding to secure IMF bailout

Cash-strapped Pakistan has received the nod for funding of an additional USD 2 billion in deposits from Saudi Arabia

Islamabad: Cash-strapped Pakistan has received the nod for funding of an additional USD 2 billion in deposits from Saudi Arabia, a move that will help the country secure the much-required bailout from the IMF, according to media reports on Thursday.

The Saudi leadership is set to make a public announcement, probably during the upcoming visit of Prime Minister Shehbaz Sharif to the Kingdom, reported The News.

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The Saudi ambassador in Pakistan had also hinted recently that his country had always supported Pakistan in critical situations and good news would be shared soon, it said.

Pakistan’s government is now anxiously waiting to secure verification from the UAE on an additional USD 1 billion deposit for moving towards a staff-level agreement with the International Monetary Fund (IMF).

The Washington-based crisis lender has imposed the condition on Pakistan that it should secure USD 3 billion from other countries for the revival of its USD 7 billion bailout package.

The assistance from Riyadh comes at a crucial time as the IMF programme, signed in 2019, will expire on June 30, 2023, and under the set guidelines, the programme cannot be extended beyond the deadline, The Express Tribune newspaper reported.

It is yet to be seen how Pakistan and the IMF move ahead with the completion of the USD 7 billion Extended Fund Facility (EFF) programme by June 30 even if the pending 9th Review gets accomplished.

The pending 9th review was scheduled to be completed in December 2022 and the 10th review should have been kick-started from February 2023. The 11th review was scheduled to commence on May 3.

There are possibilities of extending the programme period by three to six months, but nothing is discussed and finalised so far, The News report said.

Last month, Pakistan received a rollover loan of USD 2 billion from its “all-weather” ally China.
According to the report, the finance ministry sources said the IMF was still insisting on its demand for a further increase in the interest rate according to inflation and opposing the annual subsidy of Rs 900 billion.

The IMF was unwilling to budge from its demand for Pakistan to collect Rs 850 billion in terms of the petroleum development levy (PDL), the report said.

Pakistan, currently in the throes of a major economic crisis, is grappling with high external debt, a weak local currency and dwindling foreign exchange reserves, enough to shore up for barely one month’s imports.

The IMF said the cash-starved country had a few more tasks before it could unlock a USD 6.5 billion loan to avoid a default, putting pressure on the government to secure assurances from countries that have promised financing support.

Esther Perez Ruiz, the IMF’s resident representative for Pakistan, said a staff-level agreement would follow once the few remaining points were closed, the report added.

Finance Minister Ishaq Dar is also said to meet the leadership of the UAE before leaving for the US on April 10 to attend the upcoming Annual Spring Meeting of the Bretton Wood Institutions (BWIs), known as the International Monetary Fund and the World Bank, from April 10 to 16.

Last month, the IMF said Pakistan had made “substantial progress” toward meeting policy commitments needed to unlock loans the country needs to avoid default. Pakistan has taken strict measures including increasing taxes and energy prices, and allowing its currency to weaken to restart the USD 6.5 billion IMF loan package, it said.