Minister for Information Fawad Chaudhry announced early Wednesday that the Saudi government will be depositing $3 billion into the central bank to support Pakistan’s reserves.
Chaudhry shared a statement made by the state-run Saudi Press Agency.
According to the statement: “The Saudi Fund for Development (SFD) announced the issuance of the Royal Directive to deposit an amount worth of US$3 billion into the State Bank of Pakistan to help the Pakistani government support its foreign currency reserves and support it in facing the impacts of the coronavirus pandemic.”
In addition, a royal directive was issued “to finance the oil derivatives trade with a total amount of US$1.2 billion throughout the year”
The statement said that these directives “confirm the Kingdom of Saudi Arabia’s ongoing stance in supporting the economy of the sisterly Republic of Pakistan”.
Minister for Energy Hammad Azhar followed with a statement saying that the Saudi Development Fund has “generously announced for Pakistan an oil deferred payments facility of $1.2bn/annum and a $3 bn deposit with SBP.”
The minister said this will “help ease pressures on our trade and forex accounts as a result of global commodities price surge”.
Back in May, Chaudhry had said Saudi Arabia had agreed, in principle, to revive the facility of oil supply to Pakistan on deferred payments.
The prime minister, on his visit to the kingdom earlier this year, had made a request to Saudi Arabia to resume the supply of oil to Pakistan on deferred payments for an extended period. It is unclear whether the same request was revived during the prime minister’s visit to the kingdom over the weekend.
Earlier, Saudi Arabia had provided a $6 billion financial package, including $3 billion deposits into the State Bank of Pakistan and the remaining $3 billion for oil facility on deferred payment on an annual basis.
The previous oil facility from KSA was signed for three years during the visit of Saudi Crown Prince Mohammad Bin Salman to Pakistan. This facility was made operational from July 2019 with the understanding that the first-year bill would be paid on monthly basis and then second-year oil would be obtained on deferred payment.
The facility was agreed upon for three years with the possibility of rollover of second and then the third year. Both sides had agreed that this facility would be provided through the IDB’s Islamic Trade Finance Facility (ITFC). It is not known how much Pakistan had availed in its first year, and the facility was later suspended.