• Agreement for setting up of oil refinery near Gwadar may be signed after cabinet approval
• Speaking at investment conference, PM Imran vows to hold peace talks with India
ISLAMABAD: After weeks of speculation, Saudi Arabia on Tuesday stepped forward with a $6 billion bailout package for Pakistan’s ailing economy.
The package includes $3bn balance of payments support and another $3bn in deferred payments on oil imports.
Agreements in this regard were signed on the sidelines of the second edition of the annual Future Investment Initiative (FII) Conference in Riyadh. It showcases economic and investment opportunities in Saudi Arabia as it pursues Vision 2030 for diversifying its economy. The Pakistani delegation was led by Prime Minister Imran Khan.
This was the prime minister’s second visit to Saudi Arabia in five weeks. The primary objective of both trips was to seek financial assistance to deal with impending balance of payments crisis.
The Foreign Office in a statement said: “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.”
It was further “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”.
Pakistan imports 110,000 barrels of crude per day from Saudi Arabia. Taken at the current price, the oil imports from the kingdom amount to around $3bn in a year.
Pakistan, which is facing the current account deficit of $18bn, had earlier this month sought assistance from the International Monetary Fund (IMF) to deal with the aggravating balance of payments problem. An IMF mission is scheduled to visit Islamabad on Nov 7 for talks on the size of the loan facility that Pakistan could be requiring.
Imran Khan had in an interaction with the media recently said that the country could immediately need around $12bn to address with the problem.
Saudi Arabia has in the past also helped rescue Pakistan’s economy from dire situations on a number of occasions. The Kingdom had last time in 2014 gifted Pakistan $1.5bn to beef up its foreign exchange reserves.
The Saudi package may provide breathing space to the government for dealing with economic challenges, but would not be enough to avoid the IMF facility. It is believed that improved foreign exchange reserves would strengthen Pakistan’s negotiating position in talks with the Fund.
The situation could further improve if China also makes some commitments to rescue its ‘all-weather friend’. PM Khan is scheduled to travel to China on Nov 3.
During talks with Mr Khan, the Saudi government reaffirmed its interest in setting up an oil refinery in Pakistan. Talks on setting up of the refinery had started during the prime minister’s visit to the Kingdom last month. Later a Saudi delegation visited Pakistan for studying the prospects of the project.
“Saudi Arabia confirmed its interest in this project, and a MoU will be signed after obtaining cabinet approval,” the Foreign Office said.
An agreement for setting up of refinery near Gwadar is expected to be inked between the Pakistan State Oil and Saudi Aramco soon.
Speaking at the FII Conference, the prime minister while identifying lucrative investment opportunities in the tourism sector, minerals, coal and gas exploration, and Information Technology said Pakistan needed two oil refineries to meet demand.
Saudi officials and businessmen during their meetings with Mr Khan showed interest in mineral resources development. The prime minister pointed out the presence of vast reserves of untapped mineral wealth of Pakistan. He said the reserves could not be exploited in the past due to terrorism and corruption, but things were changing now.
A Saudi delegation would be invited to visit Pakistan for an exploratory trip after consultations between the federal and provincial government of Balochistan, the FO said.
Mr Khan held bilateral discussions with King Salman bin Abdul Aziz and Crown Prince Mohammad bin Salman.
The crown prince, the FO said, accepted Mr Khan’s suggestion for reduction of visa fee for Pakistani workers. It described the decision as “a significant step towards enhancing Pakistan’s workforce in Saudi Arabia, as well as facilitating travel of people from both countries”.
Mr Khan in his speech at the FII Conference said that his government would once again offer peace talks to India after the coming elections in the neighbouring country.
“Now what we are hoping is that we wait until the elections then again we will resume our peace talks with India,” he said as he recalled that he had soon after coming to power offered dialogue to India. He said Pakistan’s offer was then rebuffed.
India had last month cancelled a meeting of the foreign ministers of the two countries on the margins of UN General Assembly session barely 24 hours after agreeing to it.