Pakistan has received $2bn in financial support from Saudi Arabia, Finance Minister Ishaq Dar said on Tuesday, a day before the International Monetary Fund’s (IMF) board is expected to give final approval for a much-needed $3bn bailout.
“I thank Saudi Arabia on behalf of the prime minister and army chief,” Dar said in a recorded video statement, terming it a “great gesture” from the longtime ally.
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Saudi Arabia deposited the funds with the central bank, Dar said, boosting foreign exchange reserves when Pakistan had been left with barely enough to cover a month of controlled imports.
Saudi Arabia pledged the funds in April, but had held off depositing the money with the State Bank of Pakistan until it was sure that the IMF bailout would be forthcoming.
Following Tuesday’s announcement, Prime Minister Shehbaz Sharif tweeted his “deep gratitude to the leadership and brotherly people of the Kingdom of Saudi Arabia”.
“It reflects the growing confidence of our brotherly countries and the international community in Pakistan’s economic turnaround,” Sharif posted.
Teetering on the cusp of a sovereign debt default, Pakistan secured a last-gasp $3bn IMF bailout on the last day of June, though it still needs approval from the IMF board, which is meeting on Wednesday.
Under the nine-month arrangement, Pakistan will receive about $1.1bn upfront and the IMF will stagger disbursements of the rest.
The IMF deal will unlock more bilateral and multilateral financing in addition to the money from Saudi Arabia, and Dar has said he expects Pakistan’s foreign exchange reserves to rise to $15bn by the end of this month.
Fitch credit rating agency on Monday upgraded Pakistan’s sovereign rating to CCC from CCC-, and the bailout has brought some relief to investors in the country’s stocks and bonds.
Sharif’s coalition government, which is due to face a national election later this year, has to undertake more painful fiscal discipline measures to satisfy the IMF.
Pakistan’s central bank has raised its policy interest rate to a record high of 22 percent, while common Pakistanis are struggling with inflation running at about 29 percent.
Pakistan’s economy has faced several heavy blows recently, such as the devastating floods last summer that killed 1,739 people, caused $30bn in damage and impacted millions.
The country was also hit by an international commodity price spike in the wake of Russia’s war in Ukraine.