Pakistan gets $ 3 billion Saudi deposit
Pakistan has finally received the much-anticipated Saudi deposit worth $ 3 billion as part of Riyadh’s latest bailout to boost Islamabad’s foreign exchange reserves, further strengthening economic ties between the two countries.
“Good news, $ 3 billion Saudi deposit received by SBP [State Bank of Pakistan]Prime Minister’s Finance and Income Advisor Shaukat Tarin tweeted on Saturday.
“I would like to thank His Excellency Crown Prince Mohammed Bin Salman and the Kingdom of Saudi Arabia for this kind gesture.”
Saudi loans are expected to bring Pakistan’s foreign exchange reserves to $ 19 billion, excluding foreign currency deposits in local banks.
As a result, the country’s import coverage improved to around two and a half months, as the monthly import bill hit a record high of $ 8 billion in November.
The estimated increase in foreign exchange reserves should stop the depreciation of the rupee and help it stabilize against the US dollar and other world currencies.
“Saudi loans are expected to help the rupee stabilize at around $ 175 against the dollar next week,” Fahad Rauf, head of research at Ismail Iqbal Securities, told the Express Tribune.
The Pakistani rupee hit an all-time low of $ 176.77 against the greenback on the interbank market on Friday.
Prior to the receipt of the kingdom’s deposits, Pakistan’s foreign exchange reserves stood at $ 16.01 billion in the week ending November 26, according to the latest weekly central bank update made Thursday.
The country’s reserves stood at $ 22.49 billion during the week, including foreign currency deposits in local banks.
“With the receipt of Saudi deposits, theoretically speaking, Pakistan’s foreign exchange reserves increased to over $ 19 billion,” Rauf said.
The central bank updates the position of the country’s foreign exchange reserves with a slight delay due to the compilation of the relevant data.
Consequently, the actual position of reserves may differ from that estimated during the next publication.
Tarin has repeatedly said that the real value of the Pakistani rupee is between Rs 165 and Rs 167 against the US dollar.
Speculators, however, undervalued it by around Rs10.
Saudi deposits and the next tranche of the International Monetary Fund (IMF) worth $ 1 billion would make “speculators suffer badly.” [of around Rs10]. “
As a reminder, it is no longer the state that determines the rupee-dollar exchange rate. However, market forces – primarily commercial banks – determine the parity given the dollar’s supply and demand position.
Rauf said the rupee could come back to around 170 rupees if the government decides to raise an additional $ 1 billion by selling sukuk in international markets. “Reports suggest Pakistan plans to float Sukuk into the global market within the next week,” he added.
Later, the IIMF is expected to provide the next $ 1 billion tranche under its $ 6 billion loan program in January.
Pakistan’s foreign exchange reserves hit a record high of $ 20.02 billion in the week ending September 10, 2021 after the IMF loaned the country $ 2.7 billion to fight the Covid-19 pandemic and improve its ability to make import payments and repay debt.
However, the continued rise in the import bill – mainly due to soaring world commodity prices and slightly due to rebounding domestic demand – and debt repayments continued to depress reserves.
Worker remittances sent home from overseas Pakistanis have been the biggest source of support for foreign currency reserves during the Covid-19 pandemic. Inflows are expected to slow with the recent reopening of overseas travel.
The outbreak of a new strain of the virus – Omicron – has, however, once again accepted the world to restrict international travel.
In addition, Pakistan’s sluggish exports have steadily improved since the start of the current fiscal year on July 1, 2021.
Pakistan’s foreign debt has steadily increased. The authorities, however, claimed that the improvement in the country’s foreign exchange reserves was not due to international borrowing, but to improved workers’ remittances and export earnings, as new foreign debt was mainly used. to reimburse the old ones.