Islamabad, March 9 According to a report on Monday, Pakistan has approached Saudi Arabia with a series of requests for long-term economic support, including converting existing short-term deposits of USD 5 billion into a 10-year long-term facility, as well as requests to enhance the deferred payment oil facility from USD 1.2 billion to USD 5 billion, securitize remittances from the Pakistani diaspora of USD 10 billion, and others.
The News reported, citing top official sources, that Pakistan's economic woes were escalating in the aftermath of ongoing geopolitical tensions amid the ongoing US-Israel-led war against Iran.
On the other hand, Pakistan is negotiating with the IMF to complete the third review under the USD 7 billion Extended Fund Facility (EFF).
Pakistan and Saudi Arabia were already in negotiations for a comprehensive economic cooperation package, and the recent escalation has provided impetus to the ongoing talks, whereby at the highest level, Pakistan has requested the necessary support to address the emerging challenges.
Pakistan has requested the conversion of existing Saudi deposits of USD 5 billion, held with the State Bank of Pakistan (SBP), into a long-term facility. This request is to convert a short-term deposit of USD 5 billion into a 10-year long-term facility with favorable pricing.
The second request is to increase the deferred payment oil facility, under which the Kingdom is being asked to enhance the facility from USD 1.2 billion to USD 5 billion. The repayment period may also be extended from one year to three years, with repayment of each tranche occurring after three years.
The third request is for the securitization of diaspora remittances. This type of securitization can boost foreign exchange reserves and reduce costly foreign borrowing.
For the fourth request, Saudi Arabia may consider providing a guarantee for Pakistan's new endeavors for international Sukuk issuance in order to allow the country to raise international capital at lower rates.
Pakistan has also requested a concessional credit line for the EXIM Bank of Pakistan. The Government of Pakistan has established a new EXIM Bank to achieve export-led growth under the IMF program.
Islamabad has also made another request to the Kingdom for consideration of waiving off bank guarantee requirements for import-related transactions with Pakistan.
The Kingdom has also been asked to consider investment, especially in the Public Investment Fund (PIF), to explore investment opportunities in the country.
The Government of Pakistan has also requested help in adjusting primary surplus targets in line with the IMF program to accommodate the proposed tax rationalization. Expenditures remain highly rigid, limiting further cuts, so the fiscal deficit may rise further, but the long-term impact will be positive.
The Saudi response to these eight requests from Pakistan could not be ascertained immediately, The News reported.
The paper said that it sent questions to the Ministry of Finance and the SBP but received no replies.