ISLAMABAD: The Saudi Fund for Development (SFD) has extended the term of a $3 billion deposit with the State Bank of Pakistan (SBP) for another year, the central bank confirmed on Thursday, noting the move would further strengthen Islamabad’s foreign exchange reserves and contribute to its economic growth. 

The term of the deposit, which was maturing on Dec. 8, was initially signed with the SBP in 2021 and was subsequently rolled over in 2022, 2023 and 2024. The deposit is crucial for cash-strapped Pakistan as it grapples with a prolonged economic crisis that has drained its reserves and triggered a balance of payments crisis in the country. 

“The Saudi Fund for Development (SFD) on behalf of the Kingdom of Saudi Arabia has extended the term for the deposit of USD 3.0 billion maturing on 08 December 2025 for another year,” the SBP said. 

“The extension of the term of the deposit is continuation of the support provided by the Kingdom of Saudi Arabia to the Islamic Republic of Pakistan, which will help in strengthening the foreign exchange reserves of Pakistan and contribute to the country’s economic growth and development,” it added. 

Saudi Arabia first extended the deposit in 2022 as Pakistan faced an economic meltdown due to years of financial mismanagement and losses from climate disasters. Pakistan was on the brink of a sovereign default in June 2023 before it secured a last-gasp financial bailout package from the International Monetary Fund (IMF). 

Pakistan and Saudi Arabia enjoy cordial ties and cooperation in economic, defense, tourism, minerals and other sectors. Riyadh has extended crucial support to Islamabad over the years whenever it has faced economic challenges. 

This support ranges from providing Pakistan with oil on deferred payments, providing guarantees to international lenders such as the IMF and extending the term of its deposit with the SBP. 

Saudi Arabia also serves as the top source of remittances for Islamabad, with more than 2.5 million overseas Pakistani nationals residing in the Kingdom. The two countries also signed a strategic defense pact in September, according to which an attack on one country will be seen as an attack against both of them.