Saudi Arabia’s Crown Prince Mohammed bin Salman has ordered exploring ways to increase the kingdom’s assistance and investments in Pakistan, to aid the South Asian country reeling from deadly floods and economic crisis.
The Saudi Fund for Development will conduct a study on increasing the deposit in Pakistan’s central bank to $5 billion from $3 billion, Bloomberg reported quoting Saudi Press Agency.
The report further said that Saudi will also increase investment in Pakistan to $10 billion.
The Saudi’s fund provides soft loans and grants to developing countries as a means to bolster allies and cement new relationships.
The statement comes a day after the Crown Prince met with Pakistan’s army chief General Syed Asim Munir to review ways to enhance bilateral ties and strengthen cooperation.
Saudi Arabia had extended another loan of $3 billion at 4% to Pakistan for a year in December.
Pakistan’s economy was strapped for funds after a gridlock with the IMF over tax targets delayed disbursal of loan installments. The IMF is yet to approve the release of $1.1bn originally due to be disbursed in November last year.
Pakistan, with low foreign exchange reserves and rising sovereign risk, saw its currency depreciate by 14 per cent between June and December 2022, and its country risk premium rise by 15 percentage points over the same period.
Islamabad’s foreign exchange reserves dropped to $5.6 billion- the lowest in almost nine years and enough to cover less than one month of imports.
Pakistan’s consumer price inflation reached 24.5 per cent in December on an annual basis, recently coming off its highest rate since the 1970s, the World Bank said.
Pakistan faces challenging economic conditions, including the repercussions of the recent flooding and continued policy and political uncertainty.
Food prices have risen rapidly in South Asia, especially in Pakistan and Sri Lanka, increasing the risk of food insecurity in the region. Export bans on food, also increasingly prevalent, could have unintended consequences and exacerbate the increase in global food prices.
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