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October 24, 2018

$6 billion Saudi package to ease Pakistan’s fiscal pain

Top Story

October 24, 2018

ISLAMABAD/RIYADH: Prime Minister Imran Khan’s frantic efforts to manage the balance of payment crisis finally cut ice with the Saudi government on Tuesday which committed $3 billion to Pakistan as balance of payment support for one year and supply of $3 billion worth of oil on deferred payment for three years. The package totals $12 billion.

"It was also agreed that a one-year deferred payment facility for import of oil, up to USD 3 billion, will be provided by Saudi Arabia. This arrangement will be in place for three years, which will be reviewed thereafter," said a statement issued by the Prime Minister’s Office. The statement said the Saudi leadership had also confirmed its interest in the oil refinery project in Pakistan.

The prime minister was accompanied by Minister for Foreign Affairs Makhdoom Shah Mehmood Qureshi, Minister for Finance Asad Umar, Minister for Information Chaudhry Fawad Hussain, Adviser to the Prime Minister on Commerce Abdul Razaq Dawood and Chairman Board of Investment Haroon Sharif.

Apart from attending the conference, Imran also met with King Salman bin Abdul Aziz and Saudi Crown Prince Mohammad bin Salman to discuss matters of mutual interest.

Crown Prince Muhammad bin Salman (MBS) agreed to the prime minister’s suggestion to reduce visa fee for Pakistani workers, which is a significant step towards enhancing the country’s workforce in Saudi Arabia as well as facilitating travel of people from both the countries.

“Far-reaching decisions on bilateral economic and financial cooperation were also agreed during the meetings with Saudi leadership,” the statement said.

A memorandum of understanding (MoU) was signed between Finance Minister Asad Umar and Saudi Finance Minister Muhammad Abdullah Al-Jadaan under which Saudi Arabia would place a deposit of $3 billion for a period of one year as balance of payment support.

The earlier visit of Saudi delegation had evaluated the possibility of investing in a petroleum refinery in Pakistan. Saudi Arabia confirmed its interest in this project, and an MoU will be signed after obtaining the federal cabinet’s approval.

Saudi Arabia also expressed interest in development of mineral resources in Pakistan. For this purpose, the federal government and Balochistan government will consult, following which a delegation of the Kingdom will be invited to visit Pakistan.

After the inauguration of the FII conference, a Pakistan-specific session was organized in which Prime Minister Imran Khan underlined the country's priorities towards optimising the economy and attracting foreign investment. Stressing the focus of his government on human resource development, the prime minister highlighted the potential of Pakistani youth and identified lucrative investment opportunities in the tourism sector, minerals, coal and gas exploration and information technology. The prime minister also took several questions from the audience comprising hundreds of entrepreneurs.

Imran arrived in Madina on Monday, where he was received by Prince Faisal bin Salman, Governor of Madina. After paying a visit to Masjid-e-Nabwi (Peace Be Upon Him), the prime minister proceeded to Riyadh, where he was received by Prince Faisal bin Bandar bin Abdul Aziz, Governor of Riyadh.

Addressing the Future Investment Initiative (FII) conference, Imran Khan highlighted some of the key challenges facing his government and his plans to tackle them. "We need new loans to pay off our previous loans. We have approached the International Monetary Fund (IMF) and our friendly countries," he added.

Stating that his government had been in power for 60 days, he said, "The immediate concern for our government is to increase our exports so we can bolster our foreign exchange reserves."

Warning that the next three to six months will be difficult for Pakistan, Imran said, "Our institutions were destroyed as corrupt people were in top positions but we are taking measures to increase exports."

He said Pakistan's strength was overseas Pakistanis and the government had to make conditions favourable for them to invest in the country. "We are working to create a favourable environment for investment in the country and will introduce a one-window operation for it," he said.

"We need to increase foreign reserves with remittances from the 8 to 9 million Pakistanis working abroad, we need to give incentives to exporters and create opportunities for investment,” he added.

He also asserted, "We need to clamp down on money laundering and are taking measures." Speaking about his Naya Pakistan Housing Programme, PM Imran said, "There is a need for 10 million houses in Pakistan and we have embarked on a programme to build five million houses in the initial phase."

Imran also announced, "We are restructuring our duty and tax structure." The premier further said Pakistan was a country with great potential and was one of the most diverse countries in the world.

"This is the best time for investors to come to Pakistan," he added. Imran further said he had spoken to Saudi Crown Prince Mohammed bin Salman about boosting investment ties between the two countries. "There is a vast amount of mineral wealth in Pakistan. We have some of the largest gold reserves in the world, as well as reserves of copper and zinc," he added.

Regretting that mineral reserves in Pakistan could not be extracted due to terrorism and corruption, PM Imran maintained, "This will change now."

"There was hardly any investment in our mineral resources and one of the reasons as I pointed out was the war on terror as investors would not return to Pakistan. We also had very poor governance and corruption," he added. "Pakistan suffered a lot from terrorism post-9/11 but now, thanks to our security forces and intelligence agencies, we have controlled terrorism."

"Pakistan’s biggest resource are its people below the age of 30," he maintained. The premier lamented that information technology was not focused on earlier, but said, "Our government is giving importance to the IT sector."

Upholding that Pakistan's two biggest problems were corruption and poverty, PM Imran said, "We have asked the Chinese government to help us with eliminating corruption and poverty alleviation.

"In the past five years, China has clamped down on corruption and we have to look for ways to curb it as white collar crime is hard to convict. Secondly, they have pulled out a large amount of people out of poverty," he added.

The premier also hailed the China-Pakistan Economic Corridor "as very important" for Pakistan and said that the project had increased the country's strategic importance. "China is a huge market for Pakistan and economic zones such as Gwadar are being developed."

He further stressed, "What Pakistan needs most right now is peace and stability. One of the reasons we are at this stage, is because of instability and war." Responding to a question about relations with neighbours, the prime minister said, "Pakistan's relations especially with Afghanistan and India are crucial." He, however, expressed disappointment that India did not respond to Pakistan's initiative for dialogue.

"We need stability and that means peace with all neighbours. Our problems right now are with Afghanistan and India but I am afraid we received no response from India, in fact we got rebuffed by New Delhi," he said.