Pakistan has received $2 billion from Saudi Arabia, according to Finance Minister Ishaq Dar's announcement on Tuesday. The addition of Saudi funding takes the total foreign reserves of Pakistan to USD 6.5 billion. This is a significant step for the cash-strapped country that is struggling to make its international obligations. A significant barrier to Pakistan's arrangement with the International Monetary Fund (IMF), which was stalled for more than nine months and eventually expired, was multilateral and bilateral money. The IMF's board, which will convene on July 12, must approve a short-term agreement that Islamabad inked on June 30 under a standby arrangement that will disburse $3 billion over the course of nine months. The SBA has now given the country breathing room, preventing a sovereign default, and assisted in streamlining the government's fiscal policy.
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Analysts claim that Pakistan's economic crisis may have escalated into a debt default in the absence of the IMF bailout due to the country's sky-high inflation and insufficient foreign exchange reserves for a month of restricted imports. Ishaq Dar expressed gratitude to General Asim Munir, the Chief of Army Staff, on behalf of Prime Minister Shehbaz Sharif for his assistance to the government. He also praised the Saudi royal family for being "true brothers" in the Middle East.
The finance minister declared that "we have reached stability" and that "I believe that there will be more positive developments on the economic front in the coming days."After the IMF agreement, Pakistan's long-term foreign currency issuer default rating was improved by the Fitch credit rating agency from CCC- to CCC, which had been at CCC- for almost a year.
With the IMF agreement in place, Pakistan can now access more outside funding. According to sources in the Finance Division, Pakistan secured $3.5 billion in bilateral financing from China, $2 billion from Saudi Arabia, and $1 billion from the United Arab Emirates for the plan it submitted to the lender.
Pakistan hopes to obtain $3 billion from the IMF, $500 million from the World Bank, and $500 million from the Asian Development Bank on the multilateral front. Local governments, including $1 billion in bonds and $3.6 billion to multilateral creditors, are anticipating $25 billion in gross new external funding in FY24, compared to $15 billion in public debt maturities.
