Saudi Arabia will expand its oil loan to Pakistan

Saudi Arabia will extend an oil loan to Pakistan and consider shifting dollar deposits as the South Asian country seeks to contain one of Asia’s highest inflation rates and prevent a current account crisis, according to the report. Bloomberg.

The kingdom is considering options, including extending the $ 3 billion deposit at the State Bank of Pakistan, the countries said in a joint statement on Sunday following a meeting between Prime Minister Shehbaz Sharif and Crown Prince Mohammed bin Salman. Pakistan welcomed Saudi Arabia’s decision to extend the agreement on financing crude and oil exports, according to the statement, which did not provide details.

Sharif, who took office last month following the ouster of Prime Minister Imran Khan by the joint opposition, faces the politically difficult task of stopping Khan’s fuel subsidies and raising pump prices if he wants to borrow from the International Monetary Fund. Anti-inflation protests have already erupted in parts of the region, as the war in Ukraine increases the cost of everything from crude oil to coal.

Saudi Arabia pledged $ 4.2 billion in aid to Pakistan when Khan visited the kingdom in October. That included a $ 3 billion deposit with the State Bank of Pakistan to help boost its reserves and a facility to finance $ 1.2 billion worth of oil derivatives trade during the year.

Sharif recently rejected a minister’s proposal to increase local fuel costs, days after discipline was sworn in to unlock $ 3 billion pending a loan deal with the IMF, which was suspended amid political unrest in Pakistan. An IMF staffer will visit Pakistan after May 7 to discuss issues related to petrol and electricity subsidies.

Pakistan saw its foreign exchange reserves fall in less than two months of import coverage following the delay in the IMF lending program. It also resorts to power outages, as power plants run short of fuel and funding.