KARACHI: The State Bank of Pakistan (SBP) confirmed on Friday that it had received an additional $1 billion from Saudi Arabia as part of the financial support package promised by Riyadh.
“Yes, we received $1 billion from Saudi Arabia today,” Abid Qamar, SBP spokesman, confirmed to Arab News.
Pakistan's stock market (PSX) reacted in a positive manner to the transfer of the second tranche with the benchmark KSE 100 index posting a 574 points gain. "The market sentiments were positive following the news of Pakistan receiving the second tranche. The expectations of receiving the third tranche in the first week of January will keep the investors sentiments positive in the coming weeks," Zafar Moti, former director of PSX, told Arab News.
According to the central bank, Pakistan’s foreign exchange reserves, during the week ending on December 7, decreased by $242 million to $7,260.4 million because of external debts servicing and other official payments.
With the inflow of the second tranche of $1 billion, the reserves have increased to approximately $8 billion. “The exact figure cannot be ascertained at this point because of constant inflows, outflows, and other payments,” Qamar said.
However, the currency market discounted the inflow of funds due to the open market's lackluster performance.
"The market's major activity is taking place in the grey market," Zafar Paracha, General secretary of Exchange Companies Association of Pakistan, said, adding that the market is expected to fully react on Monday.
Malik Bostan, President of the Forex Association of Pakistan, said that due to less inflow, as compared to the outflows the country is liable to make, the market reaction was not overwhelming. "The market has already absorbed the impact of the Saudi bailout package when it was announced," Bostan added.
Facing a $12 billion external financing gap, Pakistan secured a $6 billion package from Saudi Arabia: $3 billion in foreign currency support and $3 billion worth of oil on deferred payments. The details were worked out during the Prime Minister Imran Khan's visit to the country in October this year.
As for the final tranche of $1 billion, the SCB spokesman said: “The third tranche is expected in January 2019.
Pakistan received the first tranche of $1 billion from the Kingdom on November 19.
PM Khan, who assumed office in August this year, has twice visited Saudi Arabia to seek financial support.
Recently, Finance Minister Asad Umar said that Saudi Arabia’s upcoming investment would be "the biggest foreign investment" in the history of Pakistan. The cabinet is expected to clear the way during a scheduled meeting next week.
PM Khan also visited China for funds to support the country’s fragile balance of payments situation.
However, Umar has repeatedly said that the country is "out of the balance of payments crisis".
Islamabad is also in talks with the International Monetary Fund (IMF) for a possible loan package. The final round of talks is expected to take place next month.
Pakistan suffered a current account deficit of $18 billion during the fiscal year FY18. “The balance of payments situation has been the Achilles heel in Pakistan’s macroeconomic environment,” a report from Pakistan Investment Strategy 2019, issued by Arif Habib Limited, stated.
“In a symbolic and economically demanding move, Imran Khan chose Saudi Arabia as his first official tour after taking the oath. Pakistan is facing severe challenges in its balance of payments and is in dire need of foreign assistance. Its long-standing ally, Saudi Arabia, responded positively to Pakistan’s request and provided a $6 billion financial assistance package,” the report added.
The present balance of payments scenario seems fragile as the SBP data shows that over the course of the next 12 months, forward foreign currency swaps remains at an alarming level of $6.9 billion along with scheduled debt repayments of $11 billion.
