Saudi Arabia has come to Pakistan’s rescue amid reports that talks with the International Monetary Fund (IMF) are not moving forward. The prime minister has just returned from a visit after which the kingdom announced it was providing the support package.
Saudi Arabia has pledged $4.2bn in assistance, providing relief to the nation at a time when the foreign exchange reserves are dwindling fast and the economic situation is worsening. This includes depositing $3bn with the State Bank of Pakistan (SBP) to shore up reserves, and reviving the deferred oil payments facility worth $1.2bn which was suspended last year.
Pakistan has averted a balance of payments crisis and is seeking to reach a deal with the IMF to revive the $6bn bailout programme crucial to boost forex reserves declining for five consecutive months. The rupee is consistently depreciating, making it the worst-performing currency in the region. The talks with the IMF have remained inconclusive after weeks of negotiations. The finance minister left Washington and abruptly and now reports suggests that the finance secretary, who was leading the negotiations, is going on long leave.
In such circumstances, Pakistan has once again reached to its allies in the Middle East who have bailed out the fledgling economy on numerous occasions. The relations with Saudi Arabia had nosedived over their refusal to host a session of the Saudi-led OIC on Kashmir. Saudi Arabia war clearly displeased and subsequently demanded that Pakistan repay a $3bn loan. There was also controversy on the granting labour visas to Pakistani migrants in the Gulf region.
Islamabad realised there was no upside to the diplomatic tussle with Riyadh. In 2019, Saudi Arabia had announced $20bn investments but was vastly scaled down, suggesting the declining importance. The prime minister eventually sought to revive ties. Saudi Arabia has not changed its Kashmir stance but has offered to mediate between India and Pakistan.
The Saudis certainly have more resources to offer and Pakistan cannot distance itself from them. The support package will certainly provide a much-need boost to our economy. It needs to be seen how Pakistan will be influenced by Saudi Arabia’s gesture. The government should take any decision which can affect national sovereignty or ties with other friendly nations.
