ISLAMABAD: To provide short-term finance while negotiations with the IMF are ongoing, the government is considering approaching friendly countries, particularly Saudi Arabia, for additional deposits, report emerged on Sunday.
“Saudi authorities are “studying” the prospect of further deposits to Pakistan amid the foreign exchange reserves crunch,” The News reported citing government sources “The uncertain political situation is impeding the decision-making process, making it difficult for policymakers to make hard choices needed for the revival of the IMF program.”
The State Bank of Pakistan’s (SBP) foreign exchange reserves are depleting at a rapid pace, giving the government little time to take action. The SBP only had $4.3 billion in foreign exchange reserves as of January 6, the publication reported.
Commercial banks’ foreign currency reserves stood at $5.8 billion, taking the country’s cumulative reserves to around $10.18 billion. SBP’s reserves have dropped by $12.3 billion in the last 12 months; from $16.6 billion on January 22, 2022, to $4.3 billion on January 6, 2023.
Experts say there is a lack of understanding on moving ahead; the situation has reached a point where only action with a clear-cut vision can avert the crisis. There is no time of luxury of months, so there is a need for immediate action.
Sources said that the government’s strategy to get dollar inflows from friendly countries and utilize them as bridge financing until the IMF program is revived has so far failed.
However, even if friendly countries like Saudi Arabia have been considering the idea of a second $2 billion investment, it is unclear how long it will take them to decide, the report added. A $1 billion oil plant that was signed by the KSA with deferred payment will start up again next month (February 2023). A joint statement released at the conclusion of the PM’s visit to the country revealed nothing specifically about the additional $1 billion deposit request, but the United Arab Emirates (UAE) agreed to roll over $2 billion in existing deposits.
