The news that Saudi Arabia is ready to provide assistance to cash starved Pakistan has made headlines. But policymakers’ worries continue as the timing of the assistance to the South Asian nation will be critical to avert a default. Pakistan with just about $4.5 billion foreign exchange reserves, requires assistance from other countries and agencies almost immediately.
Saudi Arabia will undertake a feasibility study expanding its investments to $10 billion in Pakistan while extending the deposits with the State Bank of Pakistan to $5 billion after it rolled over $3 billion in December.
For one, none of the assistance promised by Saudi Arabia is new, though in a recent statement, the Saudi Press Agency (SPA) affirmed its supportive stance towards Pakistan.
“Prince Mohammed bin Salman bin Abdulaziz Al Saud, Crown Prince and Prime Minister, has directed to study augmenting the Kingdom of Saudi Arabia’s investments in the sisterly Islamic Republic of Pakistan, which have previously been announced on August 25, 2022 to reach $10 billion,” SPA said. Pakistan’s Finance Minister Ishaq Dar has been repeatedly assuring the country of Saudi assistance. Clearly, the investment proposal is not new.
Local newspaper Dawn earlier said that though Pakistan may receive planned foreign assurances that will help meet the country’s debt repayment obligations this year. “But what happens in the next fiscal year and after? The unfortunate reality is that we as a nation are not ready to accept the precariousness of our situation and continue to live beyond our means,” it noted.
Pakistan’s foreign exchange kitty currently comprises borrowed money with China providing assistance of $2.3 billion, and Saudi rolling over $3 billion debt. The International Monetary Fund which has halted its financial assistance programme has also provided $1.2 billion.
“Today, each dollar we have is borrowed; we are currently maintaining negative reserves. So we are now at the mercy of certain friendly countries for our survival. If they pump in more dollars, we will survive the crisis and not default,” Dawn quoted Fahad Rauf, head of research at Ismail Iqbal Securities as saying.