Pakistan has urged Saudi Arabia to extend the duration of its assistance that Riyadh had provided in form of deposits and oil facilities on deferred payment, the country’s Finance Minister Miftah Ismail said, as Islamabad struggles to wrest its fast-depleting foreign exchange reserves amid a record trade deficit.

In December last year, Saudi Arabia, Islamabad’s closest ally in the Gulf region, had deposited $3 billion in the State Bank of Pakistan (SBP) and provided facilities for the import of fuel on a deferred payment basis in order to stabilize its foreign exchange reserves.

However, since then, the country’s economy has anything but improved. During the recent visit of newly elected Prime Minister Shehbaz Sharif to Saudi Arabia, Islamabad had sought further economic assistance, including the extension of earlier facilities.

In the first nine months of the current fiscal year (July-June), FY 22, Pakistan’s trade deficit was recorded at $35 billion and is now all set to surpass the earlier record of $37 billion posted in FY18. The current account deficit was at around $15 billion in the same period.

The new government, which came to power only last month, has squarely blamed former prime minister, Imran Khan, for the mismanagement of the economy. Ismail said Khan had left the fastest growing inflation in the history of Pakistan, and took record loans during his tenure, reported The Express Tribune.

In April, inflation (measured by Consumer Price Index) climbed to a two-year high at 13.4 percent while food inflation shot up to 15.5 percent year-on-year in April, according to data released by the Pakistan Bureau of Statistics (PBS). 

Currently, Islamabad is engaged in a tough negotiation with the IMF, seeking to revive and possibly extend the $6 billion bailout package. Initiated in 2019, the IMF assistance program remains stalled since 202o after the government ignored proposed reform measures suggested by the IMF.

A reversal in huge fuel and electricity subsidies, reduction in circular debt, cuts in government spending, and the withdrawal of tax amnesty schemes are among other conditions set by the IMF for the revival of the package.

Commenting on the previous negotiations, Finance Minister Ismail said the earlier government had made promises to the IMF which were not in the national interests.

"Those promises are no less than landmines….Now, we are stuck with the promises the previous government made with the IMF,” Ismail said, while also blaming Khan for destroying the China-Pakistan Economic Corridor (CPEC), Beijing’s flagship program under its ambition Belt and Road Initiative (BRI). 

(SAM)