Saudi Arabia pledges $3bn to Pakistan, defers oil payments

In this handout photograph released by Pakistan’s Press Information Department (PID) on October 23, 2018, Saudi King Salman meets with Pakistan’s Prime Minister Imran Khan during a meeting in Riyadh. Saudi Arabia. (AFP)
Updated 24 October 2018
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Saudi Arabia pledges $3bn to Pakistan, defers oil payments

  • It was agreed Saudi Arabia will place a deposit of $3 billion for a period of one year as balance of payment support: statement
  • Pakistan is seeking foreign aid to help plug a massive budgetary gap which the Pakistan prime minister has blamed on the mismanagement of the previous administration

RIYADH: Saudi Arabia has pledged $3 billion in support to Pakistan and allowed for deferred oil payments to help stave off a budget crisis.

The deal came as Pakistani Prime Minister Imran Khan attended the opening of the Future Investment Initiative (FII) in Riyadh on Tuesday.

Earlier Khan met with King Salman and Crown Prince Mohammed bin Salman to discuss bilateral issues. It was his second visit to the Kingdom in just over a month.

“It was agreed Saudi Arabia will place a deposit of $3 billion for a period of one year as balance of payment support,” Pakistan’s Foreign Ministry said in a statement.

“It was also agreed that a one-year deferred payment facility for import of oil, up to $3 billion, will be provided by Saudi Arabia. This arrangement will be in place for three years, which will be reviewed thereafter.”

During his address to the gathering of global business executives, Khan also confirmed that Pakistan was in talks with the International Monetary Fund (IMF) for a new bailout.

Pakistan is seeking foreign aid to help plug a massive budgetary gap which the Pakistan prime minister has blamed on the mismanagement of the previous administration. During his election campaign, the former cricketer vowed to create 10 million jobs and establish an “Islamic welfare state.”

After a consultative visit last month, the IMF had warned that Pakistan needed to quickly secure “significant external financing” to avert a crisis. 

Saudi Arabia and Pakistan have also discussed potential investment in mineral resources in Balochistan, the largest of Pakistan’s four provinces which borders Iran and Afghanistan.

Further discussions were held about a refinery project in Pakistan, the Finance Ministry said in the statement.

Pakistan’s external balance of payments represents one of the biggest challenges facing Khan.

The country’s current account deficit has ballooned as its central bank’s foreign reserves dropped to about $8.1 billion in October.

That was barely enough to meet the country’s sovereign borrowings between now and the end of the year.

The IMF expects Pakistan’s economic growth to slow to about 4 percent in 2019.

Pakistan is seeking to attract increased inward investment to help shore up its finances and Khan used the event as platform to talk about opportunities in sectors such as tourism, minerals, coal and gas exploration.

He also highlighted what he said were the successes of Pakistan in the fight against terrorism, which has brought peace and stability to the country, and pointed to the significance of the China-Pakistan Economic Corridor (CPEC).

China has become an increasingly high-profile investor in Pakistan as Beijing pushes ahead with major projects such as the CPEC.


Saudi Vision 2030 and CPEC: heralding regional prosperity 

Updated 11 min 37 sec ago
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Saudi Vision 2030 and CPEC: heralding regional prosperity 

  • Pakistan and Saudi Arabia are making common efforts to develop their economies and increase trade volumes
  • Gwadar Port, which is the apex of the CPEC project, is strategically located in the Arabian Sea

The development of infrastructure — such as better roads, ports, highways and airports, along with elements such as power, water and human capital — are important factors that help define the economic prosperity of a nation. It is a universally recognized fact that countries cannot fully take their place in the league of developed nations unless they invest in all aspects of infrastructure.

A key factor in the modern economic world is linkage or connectivity, within a country and with its neighbors. This increases the flow of goods, information and people across regions. Regional connectivity and progress are related to each other as visions of shared development. This is the perspective behind the development of the China-Pakistan Economic Corridor (CPEC).

Gwadar Port, which is the apex of the CPEC project, is strategically located in the Arabian Sea. It occupies a key position between South Asia, Central Asia and the Middle East, and lies close to the Strait of Hormuz, which is the gateway for the supply of about 20 percent of the world’s oil.

The corridor aims to transform the region and act as a catalyst for economic change by integrating South, Central and Western Asia. Afghanistan, a landlocked country, can be a major beneficiary of the project. Pakistan has pledged to construct a 265-kilometer motorway between Peshawar and Kabul to link Afghanistan with CPEC. This will connect Afghanistan with other regions and also allow the country to start conducting commercial activities through the Indian Ocean. CPEC also offers opportunities to landlocked Central Asian Republics to diversify their energy channels.

Pakistan and Saudi Arabia are making common efforts to develop their economies and increase trade volumes. The Vision 2030 project of Saudi Crown Prince Mohammed bin Salman is a package of social and economic policies designed to free the Kingdom from its dependence on oil exports and to build a prosperous and sustainable economic future by focusing on country’s strengths and policies. Pakistan is also following an ambitious development plan, Pakistan Vision 2025, designed to help the country to develop and take its place among the world’s leading economies.

An important aspect of the Saudi Vision 2030 is diversification of the economy to increase non-oil revenue by gradually shifting its economic base. This diversification plan needs new markets and trade routes. CPEC offers a host of opportunities for trade with Central Asia, East Asia and the Far East.

CPEC will considerably reduce the distance of current sea routes from the Middle East and Africa to East Asia, and the cost will be significantly reduced. Currently, oil imported by Beijing from Gulf countries reaches China after a journey of 16,000 km. After the completion of Gwadar Port project, the distance will be reduced to about 3,000 km, making it safer, more efficient and more feasible. In the same way, imports to the Middle East from China will take less time to transport and the cost will be lowered.

The CPEC routes will not only provide a means for the carrying of goods and materials but also for the transfer of knowledge and innovations. People-to-people contact will rise. Intercultural communication will result in increased commerce, technological growth and cooperation. This interdependence will help foster prosperity, peace and tranquility.

It can be concluded therefore that Vision 2030 and CPEC are not only linchpins of regional connectivity but will enhance economic activity and be beneficial for the prosperity of people throughout the region.

 

•  Muhammad Arshad Munir is press counselor at the Pakistan Consulate in Jeddah.