Saudi Arabia has agreed to provide $2 billion in financing to Pakistan, which could make it easier for the Pakistani government to receive a $1.1 billion tranche from the International Monetary Fund (IMF). The Express Tribune reported on Thursday.
Riyadh's loan guarantees would help reduce the threat of default in Pakistan amid a deep economic crisis, and would also serve to continue IMF financing, the publication quoted officials from the country's finance ministry as saying.
The condition for this is receiving $3 billion from the creditor countries as a new loan, or extending the same amount for an earlier loan with an expired repayment period, the fund said. Pakistan and China are still discussing the extension of the $2 billion loan that expired on March 23, 2023.
The Pakistani government must also meet additional IMF conditions: continue to raise the interest rate in line with rising inflation, impose a tax on the operation of oil wells in the country, further reduce automobile fuel imports and raise fuel prices.
Since late January, Pakistan has been negotiating with the International Monetary Fund to provide another $1.1 billion tranche. One of the important conditions put forward to Islamabad by the international lender is to guarantee external financing needed to ensure the solvency of the Islamic republic.
Pakistan's financial assistance program of more than $7 billion was approved by the fund's management on July 3, 2019. The seven tranches granted to the country totaled $4.2 billion. The ninth review of Pakistan's compliance with the fund's requirements, which consist of structural reforms of the state financial system and economy, is now underway.
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Based on materials from TASS