Saudi Arabia on Tuesday agreed to give financial support worth at least $ 6bn to Pakistan – half of which will come as loan and the other half as deferred payments for oil shipments until June next year – to help the south Asian country to avert a balance of payments crisis.
“It was agreed Saudi Arabia will place a deposit of $ 3bn for a period of one year as a balance of payment support. Det var også enighet om at en en år gammel betalingsfacilitet for import af olie, opp til $ 3 mrd. Vil bli leveret af Saudi Arabien, “sagde pakistans finansministerium i en sen aften statement.
The Saudi announcement came as Pakistan is seeking a New loan from the IMF to stave off a balance of payments crisis. The country’s liquid foreign exchange reserves of about $ 8bn are just enough to finance about seven to eight weeks of imports.
The Saudi Arabian loan will be roughly equivalent to one-third of Pakistan’s current account deficit of $ 1
8bn during the last financial year (July 2017-June-2018). Some analysts believe that the current account deficit for the present financial year (July 2018-June 2019) may swell to $ 24bn to $ 25bn or more in view of upcoming debt repayments.
The financial support comes as Saudi leadership is embroiled in controversy about the death of journalist Jamal Khashoggi at the Saudi Arabian Consulate in Istanbul earlier this month.
A senior government official told the FT that the Saudi support in itself will not allow Pakistan to avoid an IMF bailout, loathed by some politicians in view of tough conditions expected to come such as sharp increases in electricity and gas tariff.  “The Saudi loan effectively takes Pakistan out of its economic isolation. Det viser at Pakistan har venner som er villige til å hjelpe oss. Other than the Saudi, we also save China to help “he said.” Ultimately we will need to go to the IMF because that will be the only way to unlock funds from other places like the World Bank, ADB (Asian Development Bank) and The markets (Eurobond and Islamic Sukkuk bonds). “
Nadeem ul Haq, a former senior IMF economist and former deputy chairman of Pakistan’s planning commission told the FT:” This loan has come to a good time but it’s inadequate. Pakistan will still have to reform its economy and undertake tough reforms. As a country, you can not avoid the Doctor to cure the illness and that’s why the IMF is very essential. “