The Saudi Fund for Development (SFD), on behalf of the Kingdom of Saudi Arabia, has extended the maturity of its $3 billion deposit with the State Bank of Pakistan (SBP) for another year, following a meeting between Prime Minister Shehbaz Sharif and Saudi Crown Prince Mohammad Bin Salman. The meeting took place during the Prime Minister’s visit to Riyadh on the sidelines of the “One Water Summit” two days ago.
During their discussions, the two leaders agreed to enhance the economic, trade, and investment ties between their countries. They also expressed satisfaction with the progress made in implementing agreements and memoranda of understanding (MoUs) related to Saudi investments in Pakistan.
In a statement released today, the SBP confirmed the deposit, noting that the extension is part of Saudi Arabia’s ongoing support to Pakistan. The central bank emphasized that this move will help strengthen Pakistan’s foreign exchange reserves and contribute to the country’s economic growth and development.
This $3 billion deposit agreement, initially signed in 2021, has been rolled over for two consecutive years, in line with royal directives from Saudi Arabia that reflect the strong bilateral relationship between the two nations.
In addition to the financial support, Pakistan and Saudi Arabia signed MoUs worth $2 billion in October to boost trade and investment. The agreements, signed during a visit by a high-level Saudi delegation led by the kingdom’s investment minister, cover various sectors. These include a $70 million investment in agriculture, the establishment of advanced semiconductor chip manufacturing in Saudi Arabia, the development of a textile industry, and a white oil pipeline project. Other areas of collaboration include hybrid power projects, the creation of transformer manufacturing facilities, cybersecurity for businesses, and the export of spices and vegetables from Pakistan.
The agreements also involve the establishment of manufacturing facilities for surgical and dental equipment, as well as cooperation on Pakistan’s E-Taaleem and digitalization programs.
Pakistan, which was on the brink of default in 2022, managed to avert a crisis after the International Monetary Fund (IMF) approved a short-term bailout under stringent conditions. These reforms, however, led to rising inflation as Pakistan implemented structural changes, including hikes in gas, energy, and fuel prices. In September 2024, the IMF’s Executive Board approved a $7 billion loan for Pakistan under its Extended Fund Facility (EFF), disbursing the first tranche of $1.1 billion.
Historically, Pakistan has relied heavily on IMF bailouts, often turning to countries like the United Arab Emirates and Saudi Arabia for additional financial support to meet external financing targets set by the IMF.
