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Saudi Crown Prince Mohammed bin Salman on Tuesday directed the Saudi Development Fund (SDF) to study means to increase the Gulf kingdom’s deposits with the State Bank of Pakistan (SBP) from the current $3 billion to $5 billion to shore up Islamabad’s foreign exchange reserves.
According to a report published by the state-run Saudi Press Agency (SPA), the desire to increase the deposit confirms the kingdom’s position on supporting the economy of Pakistan. It said the crown prince—who also serves as Prime Minister of Saudi Arabia—also directed authorities to study the augmentation of the kingdom’s investments in Pakistan, which had earlier been announced at $10 billion. “This came within the framework of the existing communication between [MBS] and [Prime Minister Shehbaz Sharif],” it added.
Last month, the SDF extended the term for a $3 billion deposit in the SBP, which was set to be returned on Dec. 5. The deposit had been given to the central bank to boost the country’s foreign exchange reserves in accordance with an agreement inked in November 2022.
The announcement for Riyadh’s financial support for Islamabad comes a day after Chief of Army Staff Gen. Asim Munir—in his first official overseas visit since assuming his office—met the crown prince at Al-Ula. If the deposit and investment materialize, they would prove a boon for Pakistan, which is in the midst of a currency crisis triggered by a trade deficit. Currently, the central bank has reserves of $4.5 billion, barely enough to cover even a month of imports.
Observers have warned that Pakistan needs to revive a stalled bailout with the International Monetary Fund (IMF) if it hopes to avert default, adding that this would also likely encourage other bilateral and multilateral partners to provide financial support to the cash-strapped nation.