Saudi Arabia agreed to give Pakistan $3 billion foreign currency support for a year and a loan of $3 billion in deferred payment for oil imports. Will this be sufficient to help the stock market stay up, and save the rupee from further devaluation? Does this help Pakistan negotiate better with IMF?
Firstly we need to understand that this grant from the Saudis isn’t exactly a loan, as it increases the treasury balance of the country but cannot be cashed entirely. This amount is not enough to keep the stock market up or stop rupee devaluation.
The balance of international payments have of course gotten a boost temporarily, and so Pakistan’s economy can stay afloat for a while longer is how I see it. Having $3 billion in our piggy bank doesn’t relax the standing financial turmoil.
Saudi Arabia agreed to give Pakistan $3 billion foreign currency support for a year and a loan of $3 billion in deferred payment for oil imports.
Pakistan needs to start exploiting the other available resources in terms of bilateral relations with different countries. If Pakistan is able to secure the $10-12 billion from friendly countries like China, Saudi Arabia and others it won’t probably need IMF for the time being.
So you see when the reserves are put against the dollar, consequently, the rupee goes up, which has a positive impact on the stock market. It is predicted that in the next 2-3 months, the dollar will further come down by 27-28%.
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This will ease the operation in the market, making it respond in a much more productive way. The trust of the brokers in the stock market has also been restored by in the government.
We should, however, keep in mind that the recovery of the shattered economy of Pakistan cannot start until all resources in terms of international assistance have been gathered. The IMF reviewing is due soon and Prime Minister Khan is in China soon, so there’s a chance the two countries will agree upon relevant terms.
Mr. Ramay is currently the Director Research Uptake and Business development at Sustainable Development Policy Institute (SDPI) and also the of Zalmi Foundation heading issues of digital diplomacy, security, peace, climate change and integration of youth empowerment.
The views expressed in this article are the author’s own and do not necessarily reflect the editorial policy of Global Village Space.