Pakistan thanks 'brotherly' Saudis for $2 billion ahead of IMF bailout decision

DUBAI — Pakistan Finance Minister Ishaq Dar said on Tuesday that Islamabad receives Saudi Arabia’s $2 billion monetary aid package to Pakistan — just one day before the International Monetary Fund (IMF) is expected to approve a $3 billion bailout that the country desperately needs. 

Dar said Saudi Arabia deposited the funds in his country’s central bank. It will help fill Pakistan’s reserves that were barely able to cover a month of controlled imports, as the country faces an economic crisis and risks defaulting on its external debts, reported Reuters. 

Pakistan Prime Minister Shehbaz Sharif shared his gratitude for the kingdom.

“I would like to especially thank my brother Saudi Crown Prince & Prime Minister His Royal Highness Mohammed bin Salman for ensuring this financial support to Pakistan. This deposit will strengthen Pakistan’s foreign exchange reserves,” tweeted Sharif, adding that he eagerly awaits the visit of the Saudi crown prince to his country at his earliest convenience. 

Sharif said that the money transfer is instrumental to securing the IMF’s bailout and achieving an economic turnaround. The IMF had agreed on June 29 to a standby $3 billion short-term arrangement for the beleaguered country, which it is set to fully approve on Wednesday. 

The South Asian country of 220 million is on the verge of economic default and scurrying to position itself positively ahead of the IMF decision in order to have a chance to emerge from the worst economic crisis in its history. 

A leading cause of Pakistan’s predicament is the country’s national debt, which stood at $274 billion — nearly 90% of gross domestic product, according to Agence France-Presse — in January of this year. 

This includes expenses needed for natural disasters that cost Pakistan $14.9 billion in damages and $15.2 billion in economic losses due to massive floods in mid-2022, according to the Center for Disaster Philanthropy. On Saturday, Pakistan and Switzerland signed a memorandum of understanding to enhance cooperation and pool resources on natural disaster management ahead of the upcoming summer season.  

In early January during Sharif's visit to Abu Dhabi, the United Arab Emirates agreed to lend Pakistan $1 billion on top of deferring its previous $2 billion loan. Pakistan also signed over terminal operations of the Karachi Gateway Terminal Limited, better known as the Port of Karachi, in a 50-year concession agreement with the Abu Dhabi Ports Group in late June to raise critically needed funds. The amount Pakistan received for the deal was not disclosed at the time. 

Pakistan also paid for its first government-to-government import of discounted Russian crude oil using Chinese currency in June, reported Reuters.

These steps taken by Pakistan seem to be having an effect, as Fitch Ratings upgraded Pakistan’s long-term foreign currency issuer default rating to CCC from CCC- on Monday, increasing its chances for a positive IMF bailout decision on Wednesday.