KARACHI: The State Bank of Pakistan announced on Saturday that it had received $ 3 billion from the Saudi Fund for Development to keep the U.S. dollars in its account in order to increase its foreign exchange reserves.
The Prime Minister’s advisor on finance and revenues, Shaukat Tarin, also announced that the SBP had received the $ 3 billion deposit from Saudi Arabia. “Good news, a $ 3 billion Saudi deposit received by SBP. I would like to thank His Excellency Crown Prince Mohammed Bin Salman and [the] Kingdom of Saudi Arabia for his kind gesture, ”he tweeted.
Pakistan received the Saudi fund after successful negotiations with the International Monetary Fund in Washington for resumption of lending. The country received $ 3 billion in a week after signing a deal with the SFD on November 29 following Prime Minister Imran Khan’s visit to the Kingdom in October.
A much needed boost for SBP, which has seen its reserves drop by $ 4 billion in three months
It was agreed that Saudi Arabia would also supply $ 1.2 billion worth of oil to Pakistan on the basis of deferred payments.
However, the government is being quiet about the terms and conditions of the deal, sparking speculation that it is in favor of the lender country.
When approached about the terms, the SBP replied, “As per the agreement, all terms are confidential and cannot be disclosed without the consent of both parties.
Analysts have been particularly critical of the suspected $ 3 billion withdrawal condition within three days, which can destabilize the balance of payments at any time. Additionally, the rate of return has not been disclosed by the government as analysts are speculating on higher yields compared to prevailing rates in international markets.
The SBP’s foreign exchange reserves have lost more than $ 4 billion in three months, which is alarming as import payments have exceeded expectations. SBP reserves fell from $ 20.074 billion in August to $ 16.010 billion on November 26.
The unexpected 162 percent increase in the trade deficit in November shook both the government and the foreign exchange market, reflecting the inevitable strong dollar demand for imports. The trade deficit reached $ 5.107 billion in November from $ 1.946 billion in the same month of the previous fiscal year.
The first five months of the current fiscal year recorded a trade deficit of 117.25 percent, reaching $ 20.746 billion, compared to $ 9.549 billion for the same months of the previous fiscal year.
The massive trade deficit created a serious threat to the current account which has already entered a critical state. The fiscal year 22 four-month current account deficit was over $ 5 billion compared to a surplus of $ 1.3 billion last year. The reverse situation created a panic-like situation in the currency market, as the overnight devaluation of the local currency forced importers to reserve more for future imports. The SBP aims to keep the current account deficit at 2-3 percent of GDP in FY22 when it already exceeded the target in the first quarter with 4.2 percent of GDP.
The government expects to receive $ 1 billion from the IMF while it will raise around $ 1 billion by launching Sukuk bonds on the international market. The country needs more inflows, but both foreign direct investment and remittances declined in October.
Domestic bonds such as Treasury bills and Pakistani investment bonds failed to attract foreign investment in FY22, while inflows into the Roshan digital account also slowed.
Posted in Dawn, le 5 December 2021