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Pakistan's crumbling economy - ties with Saudi Arabia

Pakistan is in dire financial straits, as the Imran Khan-led regime rightfully needs $51.6 billion foreign financial support over a two-year period (2021-2023) to meet its needs. For securing financial assistance to revive its collapsing economy, it is trying to renew its relations with Saudi Arabia. Read out the full article to know more.

According to a report, Pakistan's gross external financing need stands at $23.6 billion and $28 billion in 2021-22 and 2022-23 respectively. The development comes despite fluctuating estimates evaluated by the International Monetary Fund (IMF). The authorities are now reportedly trying to make a final effort to negotiate a labor level agreement with the IMF to reduce the gap of external financing needs.

In a recent report, the World Bank noted that Pakistan has been included in the list of top ten countries with the highest foreign debts. Citing International Debt Statistics 2022, The News International previously reported that there were "significant differences" in the amount of foreign debt accumulated in each of the DSSI-eligible countries - including the group's largest lenders which include Pakistan. The World Bank report also revealed that Pakistan's foreign debt has increased by eight percent, in June this year, another report revealed that the Imran Khan led government had borrowed $442 million from the World Bank.

However, with the suspension of program loans from the World Bank (WB) and the Asian Development Bank (ADB) now, Pakistan is at high risk of an economic catastrophe - due to the dire need of foreign direct investment over it - to make an agreement with the IMF under the existing $6 billion (EFF) expanded fund during ongoing negotiations in Washington.

In the meantime, World Bank and Asian Development Bank will continue to lend money for the project but in terms of project implementation capacity, payments are much lower. Debt rating agencies may even lower the country's rating, making the generation of funds in the form of global bonds more expensive.

Pakistan is keen to get help from countries such as Saudi Arabia and the United Arab Emirates who have compromised on its declared rule. While Pakistan has extolled its 'fraternal' relationship with Saudi Arabia, it is clear that its new 'brotherhood' with Saudi Arabia comes at a time when Pakistan is on the verge of a financial crisis. Saudi Arabia has assured a financial aid package that includes about $3 billion in deposits and $1.2 billion to $1.5 billion worth of oil supplies on deferred payments to bail Pakistan out of its chronic financial crisis. Earlier, Saudi Arabia had demanded early repayment of $3 billion in loans from Pakistan and refused to renew the $3.2 billion oil debt center in view of Islamabad's poor economy.

In spite of Saudi Arabia's financial assistance, Pakistan was guilty of poor relations with the Arab world as it apparently lacked political intelligence, economic growth, and ideological leadership trying to build an international bloc. In addition, Pakistan has failed to recognize that both Saudi Arabia and the United Arab Emirates share deep strategic and economic relations with India. Also, India-Saudi relations have been further strengthened by the signing of a defense cooperation agreement that adds to the problems in Pakistan. Saudi Arabia wants to redefine its regional prominence after being defeated by its regional rivals for several years. While Saudi Arabia has no interest in reducing relations with India at the behest of Pakistan, it wants to reduce the temptation for Pakistan to re-strengthen ties with Iran.




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