Pakistan (Common Wealth) _ Saudi Arabia has provided Pakistan with $2 billion in financial assistance, according to Finance Minister Ishaq Dar, a day before the International Monetary Fund’s board is likely to provide final permission for a much-needed $3 billion bailout.
According to Dar, Saudi Arabia has deposited the monies with the central bank, bolstering foreign exchange reserves at a time when Pakistan’s reserves were just enough to cover a month of restricted imports. “I thank Saudi Arabia on behalf of the prime minister and army chief,” Dar said in a video statement, calling the gesture a “great gesture” from the old ally.
The Middle Eastern country pledged the cash in April but did not deposit them with the State Bank of Pakistan until it was certain that the IMF bailout would be forthcoming.
According to Prime Minister Shehbaz Sharif, “it reflects the growing confidence of our brotherly countries and the international community in Pakistan’s economic turnaround. Pakistan, which was on the verge of a sovereign debt default, won the $3 billion IMF rescue on the final day of June, though it still need approval from the IMF board, which meets on Wednesday.
The IMF will stagger disbursements of the remaining $1.1 billion throughout the course of the nine-month agreement.
In addition to the money from Saudi Arabia, the IMF agreement will unleash extra bilateral and multilateral financing, and Dar has stated that Pakistan’s foreign exchange reserves will grow to $15 billion by the end of this month.
Fitch Ratings improved Pakistan’s sovereign rating to CCC from CCC- on Monday, offering some respite to investors in the country’s stocks and bonds. According to Tradeweb data, its sovereign dollar bonds rose as much as 1.8 cents on Tuesday after the Saudi help was disclosed.
The 2024 issue gained the most, surging to 77.75 cents on the dollar, up more than 30 cents from late-June lows. Pakistan’s bonds have skyrocketed since the insolvent government accepted the IMF agreement.
To appease the IMF, Sharif’s coalition government, which is set to face a national election later this year, must impose harsher fiscal discipline measures, and the central bank has raised its policy interest rate to a record high of 22%, while ordinary Pakistanis face inflation of around 29%.
