Pakistan will pay the Kingdom of Saudi Arabia (KSA) a 4 percent annual profit on a $2 billion deposit with the State Bank of Pakistan (SBP) for a one-year period.
Saudi Arabia agreed to deposit $2 billion to meet a precondition of the International Monetary Fund (IMF) in which Pakistan was asked to arrange external funding of up to $ 6 billion, reported Business Recorder.
On May 10, 2023, the Finance Division informed the Federal Cabinet via an additional agenda item that KSA had agreed to deposit $ 2 billion in SBP for 1 year at an annual profit rate of 4 percent.
The report stated that the proposed Deposit Agreement shared by the Saudi side was sent to the Ministry of Law and Justice and the Office of the Attorney General for Pakistan for vetting and clearance.
If approved by the Federal Cabinet, SBP would be authorized by the Finance Division to enter into the Deposit Agreement. The agreement had been approved by the Ministry of Law and Justice, subject to the completion of all codal formalities, and the Federal Board of Revenue (FBR) had given its approval for tax exemption.
The Finance Division sought cabinet approval for the Deposit Agreement and the Authorization Letter. Following a brief discussion, the Cabinet approved the summary titled ‘Deposit Agreement between the Kingdom of Saudi Arabia (through the Ministry of Finance) and the Islamic Republic of Pakistan (through the State Bank of Pakistan (SBP) of May 10, 2023,’ submitted by the Finance Division.
The Cabinet Division was authorized by the Cabinet to issue the decision in the instant case without waiting for formal approval of the minutes.
This development comes in accordance with Saudi Arabia’s decision last month when it gave Pakistan the green signal for financial support of $2 billion. Authorities are aiming for a similar response from UAE authorities for depositing $1 billion in SBP. Both inflows are crucial for the disbursal of IMF cash under its Extended Fund Facility for the cash-strapped nation.
