Saudi assistance

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One of the major developments from Prime Minister Shehbaz Sharif’s trip to Saudi Arabia appears to be discussions on “augmenting” the $3 billion deposit that the kingdom provided for the State Bank of Pakistan to create a forex cushion. Reports suggest that the most likely scenario is a straight extension of the loan term, although “other options” are also on the table. While there was talk of something of this nature being discussed during the trip, the fact that these reports were published in official Saudi media would suggest that talks are in the advanced stages. The money is of critical importance for Pakistan because its foreign reserves have been crashing. Depending on whose numbers you believe, the reserves have fallen between 40% and 60% in recent months and are now hovering at just over $10 billion.

Meanwhile, large cash injections from most of the usual sources seem unlikely — at least in the near future. Pakistan is also going to get a financing arrangement for oil purchases, and although few details have been provided on what exactly this would entail, it will probably be similar to the earlier deferred payment facilities. Unofficially though, we do know that Pakistan was also pursuing further deferral of payment for over $4 billion worth of oil that was imported in recent years. The amount accounts for more than half of the $7.4 billion wish-list that Prime Minister Shehbaz and his entourage were expected to present to the Saudis, according to unnamed finance ministry officials quoted in this newspaper last week. Notably, the loans and deferrals that the PTI government negotiated with Riyadh were far more restrictive than those negotiated by the previous PML-N government, including having hard one-year deadlines.

Other vague but intriguing bits of language in the joint statement referred to expanding trade and investment between the two countries. Remember, Saudi Arabia remains a massive potential market for Pakistani goods and services, while Saudi money could be lucratively invested in several industries here. Official media in both the countries also said that the Saudis would further enhance support for “economic structural reforms for the benefit of Pakistan and its people”. The rest of the official statement was largely ‘stock language’, with references to supporting each other at international forums, discussions on issues of mutual concern, ensuring internal and regional security and stability, and tackling extremism and terrorism — problems that plague all of South Asia and the Middle East.

One detail buried in the statement, however, was Riyadh welcoming Pakistan’s keenness to find lasting solutions to all disputes with India, including the Kashmir issue. This may suggest that there has been some positive movement on backchannel or other unofficial talks with India, since the Saudis made a specific reference to Shehbaz’s efforts to reach out to the Indian regime.

Published in The Express Tribune, May 3rd, 2022.

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