As a source of relief on the economic front, on Wednesday it was announced that Saudi Arabia has agreed to revive its financial support to Pakistan, including about $3 billion in safe deposits and $1.2 billion to $1.5 billion worth of oil supplies on deferred payments. According to reports, this agreement was reached during PM Imran Khan’s visit to the Kingdom this week. This development comes at a crucial juncture where talks between the current government and the International Monetary Fund (IMF) have been facing a delay, resulting in holding up the release of the next loan tranche amounting to $1 billion.
There is no doubt that this act of generosity will ease the pressure on our trade and forex accounts due to the surge in prices of global commodities. In fact, following the announcement of this news, the currency market bounced back to gain Rs2.27 against the US dollar in intra-day trading in the inter-bank market.
While it is encouraging that this development will bolster our external accounts, it is important to be wary of how we have been down this path before several times. Reaching out to external sources of help in times of crisis is not a sustainable economic policy. This is now the second financial assistance package that the kingdom has extended to Pakistan in the past three years. This trend also illustrates how we are unable to weather through such crises independently and have been unable to develop the capacity to absorb such shocks in the past three years.
Another downfall of such assistance agreements is that they are extremely vulnerable to vicissitudes of bilateral relations. As relations deteriorated with Saudi Arabia in 2018, Islamabad had to return $2 billion of the $3 billion deposits. Lifelines will eventually run out and we cannot continue to bank on such stop-gap measures. It is time to reflect on why we have been unable to move on from this approach and must recalibrate our economic policymaking accordingly.
https://nation.com.pk/28-Oct-2021/financial-assistance
