The 12-month deal will see the Gulf kingdom depositing $3 billion with the Pakistan State Bank to ease off balance of payments crisis
Pakistani stocks climbed by nearly four percent on Wednesday, hours after Saudi Arabia pledged to provide Islamabad with $6 billion in financial assistance to shore up a widening balance of payments crisis.
The benchmark KSE index of the Pakistan Stock Exchange gained 1,462 points or 3.85 percent in intra-day trading to push the index to 39,176 points.
The gains followed a string of losses on the bourse after mixed signals from newly minted Prime Minister Imran Khan’s government on plans to address the country’s deteriorating finances.
On Tuesday, Khan struck a 12-month deal for a balance of payments lifeline during a visit to Saudi Arabia, which will deposit $3 billion with Pakistan’s central bank and provide a matching deferred payment facility for oil imports.
“The market has welcomed the Saudi package which has eased off the situation Pakistan was faced with of late,” said Muzammil Aslam, former chief executive of EFG Hermes Pakistan—the only foreign brokerage house in the country.
Khan’s government has also entered talks with the International Monetary Fund (IMF) as it seeks a potential bailout package to stem its balance of payment and current account deficits.
Tuesday’s relief package will likely lessen the amount of funds the country will need to secure from the IMF, analysts said. “Pakistan might get a $6-7 billion financial package from the IMF” in the wake of the Saudi deal, said Aslam.
An IMF team is set to arrive in Pakistan in early November to begin negotiations.
Since taking power in August, the former cricketer Khan has sought loans from friendly countries such as China and Saudi Arabia, promised to recover funds stolen by corrupt officials, and embarked on a series of high-profile populist austerity measures.