Saudi deposits nod crucial for clinching IMF deal

ISLAMABAD: Pakistan requires confirmation from Saudi Arabia for securing additional deposits of $2 billion and a $950 million loan programme from the World Bank and Asian Infrastructure Investment Bank (AIIB) for the signing of a Staff-Level Agreement (SLA) with the International Monetary Fund (IMF) within the coming week.

“We are hopeful,” was the brief response on Sunday from a top government official dealing with the IMF when inquired about the possibility of getting confirmation on deposits from Saudi Arabia and a loan from the World Bank.

The World Bank’s Resilient Institution for Sustainable Economy (RISE-II) has offered AIIB lending of $950 million but it could only be secured provided the IMF programme was restored.

Another top official said that Pakistan was expecting to strike the SLA within the next few days, however, the IMF side was reluctant to give any time frame for when the agreement would be signed.

China had already re-financed two commercial loans of $1.2 billion in two instalments, $700 million and $500 million. Now two more instalments of $500 million and $300 million would be re-financed by Chinese commercial banks in the coming days.

The increased tensions between the US and China have created a very difficult situation for Pakistani policymakers because they had to strike a delicate balancing act to steer the economy and diplomacy in such a way that suits Islamabad for protecting its larger interest attached to both sides.

China has come forward to rescue Pakistan at a very difficult time as Beijing re-financed its commercial loans prior to the signing of SLA with the IMF. “It’s a great help from the Chinese friends and Islamabad expects that they will also roll over the deposits in the coming weeks,” said official sources.

Pakistan had implemented all prior actions to secure the revival of the IMF programme in order to accomplish the pending 9th Review and release of the $1 billion tranche under the Extended Fund Facility (EFF).

Under the prescription of the IMF, the government had taken a number of measures, including the unveiling a mini-budget for fetching additional tax revenues of Rs170 billion by raising the GST rate from 17 to 18 percent, raising power tariff by over Rs7 per unit, another imposition of power surcharge of Rs3.82 per unit, increasing gas tariff, allowing massive adjustment in the exchange rate, increasing petroleum development levy and hiking policy rate by 300 basis points, jacking it up from 17 percent to 20 percent.

Pakistan is eyeing to jack up its foreign exchange reserves up to $10 billion till end of June 2023 which, at the moment, stood at around $4 billion after getting two instalments of commercial loans from Chinese banks.