ISLAMABAD: Saudi Arabia on Tuesday provided a $6 billion lifeline to Pakistan on an annual basis in the shape of cash assistance and oil on deferred payments for one year, providing a much-needed breathing space to the government of Prime Minister Imran Khan.
This is the second time when Saudi Arabia has bailed out Pakistan during the last four years. However, the Saudi assistance will not address the long-term financing needs of the economy and the government may still have to enter into an IMF programme.
The Foreign Office announced the details of the deal after the end of two-day visit of the prime minister to Saudi Arabia.
The Saudi assistance will immediately push the official foreign currency reserves back to double digit in addition to lessening the stress on the external sector.
Saudi Arabia will place $3 billion cash deposits with the State Bank of Pakistan, in addition to providing a one-year deferred payment facility for the import of oil, worth up to $3 billion, according to the Foreign Office.
The kingdom has also agreed to reduce visa fees for Pakistanis.
The cash injection will immediately relieve pressure on the government and improve its negotiating position during the upcoming programme loan talks with the International Monetary Fund, starting from November 7.
Finance Minister Asad Umar and Saudi Finance Minister Muhammad Abdullah Al-Jadaan signed the Memorandum of Understanding (MoU), said the Foreign Office.
It was agreed that Saudi Arabia will place a deposit of $3 billion for a period of one year as balance of payment support with the central bank, it added.
The terms of the deposits were not clear. China has also deposited $2 billion with the SBP in July at a nominal rate of around 1%, according to sources in the SBP.
It was also agreed that a one-year deferred payment facility for the import of oil, up to $3 billion will be provided by Saudi Arabia, stated the Foreign Office. “This arrangement will be in place for three years, which will be reviewed thereafter,” it added.
Saudi Arabia agreed to bail out Pakistan during the second visit of the prime minister, as the agreement could not be reached during his September visit to the kingdom.
The prime minister is keen to avoid the IMF bailout package and had requested Saudi Arabia, China and the United Arab Emirates for placement of deposits in the central bank to artificially inflate the foreign currency reserves.
Earlier, the kingdom had given $1.5 billion grant in 2014 when the country’s economy was facing similar pressures.
Saudi Arabia had also given oil on deferred payments in the 1990s, but Pakistan never repaid the amount, according to the officials of the finance ministry.
Pakistan was in search of $12 billion foreign loans and aid to avoid default on international debt obligations, as the country is required to return $11.7 billion loans to foreign countries.
After Saudi Arabian $3 billion cash assistance, the SBP’s reserves will increase to $11 billion. The $3 billion oil on deferred payments will lower the overall financing needs by the same amount, which had been earlier estimated at $31 billion.
The cash assistance will lower the requirements to devalue the rupee, as the one-off assistance will – for the time being – improve the macroeconomic projects, according to the independent economists.
The crown prince agreed to the prime minister’s suggestion to reduce visa fee for Pakistani workers, which is a significant step towards enhancing Pakistan’s workforce in Saudi Arabia as well as facilitating travel of people from both the countries, stated the Foreign Office.
It seems Saudi Arabia will have its footprints in Balochistan.
The Foreign Office said the Saudi delegation had evaluated the possibility of investing in setting up a petroleum refinery in Pakistan during a visit in October. Saudi Arabia confirmed its interest in the project, and a MoU will be signed after obtaining an approval from the cabinet, said the Foreign Office.
It added Saudi Arabia expressed interest in the development of mineral resources in Pakistan. “For this purpose, the federal and Balochistan governments will consult, following which a delegation of the kingdom will be invited to visit Pakistan.”
Saudi Arabia has showed intentions to invest in the Gwadar Oil Refinery.
Although the Foreign Office handout did not mention Reko Diq, Saudi Arabia is keen to invest in the copper and gold mines and discussed the matter during the October visit.
Agencies add: Prime Minister Imran Khan held a meeting with Saudi King Salman bin Abdulaziz in Riyadh on Tuesday.
They exchanged views on bilateral relations and regional and global political situation. They expressed desire to further enhance and diversify bilateral cooperation.
Matters pertaining to mutual interest, trade, investment and economic ties also came under discussion during the meeting.
Foreign Minister Shah Mehmood Qureshi, Finance Minister Asad Umar, Information Minister Chaudhry Fawad Hussain, Advisor on Commerce Abdul Razzaq Dawood, Minister of State Haroon Sharif, and Pakistan’s Ambassador to Saudi Arabia Khan Hasham bin Siddique were also present on the occasion.
They also talked about the problems being faced by the Pakistani workers and laborers in Saudi Arabia.
The Saudi King directed the ministry concerned to take immediate steps to solve the problems being faced by the Pakistanis.
Meanwhile, the Prime Minister’s visit to Saudi Arabia results in significant understandings between Pakistan and Saudi Arabia. During the visit, the Prime Minister had detailed bilateral discussions with His Majesty, King Salman bin Abdul Aziz, and His Royal Highness, Crown Prince Muhammad bin Salman. The Crown Prince agreed to the Prime Minister’s suggestion to reduce visa fee for Pakistani workers, which is a significant step towards enhancing Pakistan’s workforce in Saudi Arabia, as well as facilitating travel of people from both countries.
Far-reaching decisions on bilateral economic and financial cooperation were also agreed. These included:
a. A MoU was signed between the Finance Minister Asad Umar and the Saudi Finance Minister, Muhammad Abdullah Al-Jadaan. It was agreed Saudi Arabia will place a deposit of USD 3 Billion for a period of one year as balance of payment support.
b. It was also agreed that a one year deferred payment facility for import of oil, up to USD 3 Billion, will be provided by Saudi Arabia. This arrangement will be in place for three years, which will be reviewed thereafter.
c. The earlier visit of the Saudi delegation had evaluated the possibility of investing in a petroleum refinery in Pakistan. Saudi Arabia confirmed its interest in this project, and a MoU will be signed after obtaining cabinet approval.
d. Saudi Arabia expressed interest in development of mineral resources in Pakistan. For this purpose, the Federal Government and the Government of Balochistan will consult, following which a delegation of the Kingdom will be invited to visit Pakistan.
On 23 October, after the inauguration of the FII Conference, a Pakistan-specific session was organized, in which the Prime Minister underlined Pakistan’s priorities towards optimizing the economy and attracting foreign investment. Stressing the focus of his government on human resource development, he highlighted the potential of Pakistan’s youth, identified lucrative investment opportunities in the tourism sector, minerals, coal and gas exploration, and Information Technology. He mentioned the successes of Pakistan in the fight against terrorism, which has brought peace and stability to the country and elaborated the significance of China Pakistan Economic Corridor (CPEC), including the investment opportunities in the Special Economic Zones.
The Prime Minister also took several questions from the audience comprising hundreds of business entrepreneurs.
Prime Minister Imran Khan Tuesday said Pakistan was creating an enabling environment, undertaking tax reforms and setting up a one-window operation to attract foreign investors in diverse areas.
“This is the best time to invest in Pakistan,” Imran Khan said in his address to a session on Pakistan at the Future Investment Initiative (FII), and said lucrative opportunities were available in diverse areas for the foreign investors.
The Prime Minister said his 60-day old government has undertaken a gigantic task of structural reforms to address the issues of mismanagement, corruption, red tape with the sole objective to significantly move the country up on the index of ease of doing business.
The Prime Minister mentioned the restructuring and re-evaluation of changes in customs duties on different items and provision of better tax incentives so as to make Pakistan more attractive place for investment.
“With its excellent geo-strategic location, Pakistan lies at the confluence of the Middle East, the Gulf and the Central Asian Republics,” Imran Khan told the investors at the Saudi Capital for the two-day investment conference.
He mentioned the large 100 million population under the age of 35 who could serve as a strong work force for investors in any area.
Khan attributed the little foreign investment in the past ten to fifteen years to mismanagement of the previous governments, corruption and also to country’s involvement in the war against terror.
He said several big energy giants like Exxon had returned to the country. He said the government was ensuring that things improve by the day and all facilities were available to the foreign investors.
He said Gwadar was the second deepest port in the region and offered easy access to China and, with improvement in ties with Afghanistan, to the Central Asian Republics.
The Prime Minister said the China Pakistan Economic Corridor would serve as a huge incentive for foreign investors who could invest in many areas and benefit from the access to several regional markets from Pakistan.
He mentioned energy, minerals, infrastructure and housing sectors which offered great incentives. He said his initiative of building five million houses in the next five years would generate lots of economic activity, create employment opportunities and help the country provide shelter to the poorest of its poor.
Imran Khan said Pakistan also had rich reserves of oil and gas, gold and copper that needed to be exploited and could help turn around the country’s economy.
A strong proponent of tourism, Imran Khan said with 12 climatic zones and a range of geographical wonders like the highest peaks in the world to the deep blue waters in Gwadar, there was a great scope for investment in the tourism sector.
Imran Khan said in his talks with the Crown Prince Mohammad bin Salman bin Abdul Aziz, he was informed that a large delegation of Saudi investors would soon visit Pakistan and said they would be comprehensively briefed about the incentives and opportunities available.
He also acknowledged the high level talks between the two countries for setting up an oil refinery in the country and said Pakistan currently requires two large refineries to cope with its growing requirements.
He said Saudi investors in this regard had already visited Pakistan.
He said owing to the great sacrifices by the security forces, Pakistan was today a safe and secure country.
The Prime Minister said the incidents of terrorism were today negligible and said the few that occurred had links to Afghanistan.
He hoped that a success in ongoing peace talks with the Taliban and the Afghan government and the United States, the situation would improve further.
To a question, he said developments in the Information Technology were an area of focus for the new government and it was undertaking several initiatives to encourage the youth acquire latest skills in the field.
The Prime Minister said Pakistan currently faced two serious problems; the current account deficit and the fiscal deficit and said it was currently in negotiations with the International Monetary Fund for a bailout package.
He said his government was also in contact with friendly countries to get funds to help it repay the huge loans borrowed by the previous governments.
“We have a tough period ahead, but with our structural reforms in place and the funding, we will be able to improve the situation in 6 to 12 months,” he said.
The Prime Minister said Pakistan was looking forward to bolster its forex reserves by strongly clamping down on money laundering, ending corruption and boosting its exports by providing the exporters the incentives.
He attributed most of the ills afflicting the national economy to the rampant corruption in the past and said getting white collar crime was a tough job to do and hoped with the strengthening of institutions, the money being siphoned off from development to corruption would end.
When asked about his forthcoming visit to China, Imran Khan said he looked forward to learning from its experience how it tackled its poverty and measures to end corruption.
He said in 30 years China brought out 700 million of its population from poverty and at the same time convicted over 400 of its ministers and officials on charges of corruption.
Prime Minister Imran Khan said the State of Madina was his ideal and he looked forward to put in place a system where merit and justice prevailed and said his “Naya Pakistan” was aimed at bringing back to what the country’s founding fathers stood for.
According to the information available on the website of the Future Investment Initiative (FII) thousands of delegates from all over the world would focus on a rich agenda spread over 40 individual plenaries, summits, open discussions and task force sessions focused on three core pillars: Investing in Transformation, Technology as Opportunity and Advancing Human Potential.
With more than 150 speakers confirmed from over 140 different organizations, including 17 global partner organizations, the FII program will closely examine how investment can be used to drive growth opportunities, fuel innovation and tackle global challenges.
Prime Minister Imran Khan Tuesday said peace between Pakistan and India was important to ensure that resources of the two countries be diverted towards human development rather than wasted in non-productive arms race.
“Peace with India is not just important for Pakistan, but for India as well. The money that should be diverted to human resources ends up in non-productive arms race,” the Prime Minister said in response to a question over Pakistan’s efforts to maintain cordial ties with India, at an interactive session of the Future Investment Initiative (FII), being held in Riyadh from October 23-25.
Speaking to top-tier global business leaders and investors from across the world, Prime Minister Imran Khan said for Pakistan, the peace and stability with both India and Afghanistan was important.
He mentioned that after assuming the office of prime minister, he took initiative of extending olive branch to India and regretted that Pakistan’s gesture was sadly rebuffed by India.
Imran Khan said he believed that the upcoming general election in India was the reason behind its anti-Pakistan rhetoric, however hinted for resumption of talks afterward.
“Now we are hoping, to wait for election and will again resume talks with India,” he said.
The Prime Minister said peace in Afghanistan was critical for Pakistan and added that at the moment, Pakistan was facing some low amount of terrorism coming in from Afghanistan.
He expressed his government’s commitment to support peace initiatives in Afghanistan.
Imran Khan said all stakeholders in Pakistan had a consensus that only peace and stability could bring in foreign investment, alleviate poverty and ensure employment for youth.
The Prime Minister also recalled the tough times Pakistan faced for decades following 9/11, which incurred heavy losses including 80,000 dead, over 100 billion dollars economic losses and devastation in tribal areas including displacement of thousands.
“The current and fiscal deficit, which we are facing now, is because of this instability and war when investment dried up in the country for long,” he said.
Saudi Arabia is holding the three-day FFI summit with main themes including ‘Investing in transformation’, ‘technology as opportunity’ and advancing human potential’.
Saudi Minister for Finance Mohammed al-Jadaan, Minister of Commerce and Investment Dr Majed Al-Qasabi and Saudi Minister for Energy, Industry and Mineral Resources Engineer Khalid Al Falih Tuesday called on Prime Minister Imran Khan in Riyadh, Saudi Arabia.
During the meeting, the prime minister highlighted the investment opportunities in energy and different sectors of Pakistan, PM office media wing in a press release said.
Saudi Development Fund Chairman Ahmad Al-Khateeb and head of Public Investment Fund Yasir Al-Rumayyan were also present during the meeting.
The prime minister informed the Saudi ministers about the functioning of one window operation in Pakistan for the enhancement of foreign and local investment and facilitation of the business community.
A special cell to extend facilities to the business community had also been established, he added.
The Saudi ministers expressed their interest in the economy of Pakistan and discussed projects under the bilateral investment.
During the meeting, the progress on matters in the wake of Saudi delegation’s visit to Pakistan was also reviewed. The Saudi energy minister would soon visit Pakistan to give final shape to the agreed projects.