Saudi Arabia offers to provide $11bn to Pakistan

Saudi Arabia is looking to provide Pakistan a financial lifeline of up to $11bn as the South Asian nation is on the brink of defaulting foreign debt after devastating floods.

The kingdom’s de facto ruler Prince Mohammed bin Salman bin Abdulaziz Al Saud – the crown prince and the country’s prime minister – have asked the authorities to study and augment Saudi Arabia’s investments in Pakistan, the country’s official news agency said in a statement on Tuesday.

“HRH the Crown Prince also directed the Saudi Development Fund (SDF) to study increasing the amount of the deposit provided by the Kingdom of Saudi Arabia in favour of the Central Bank of Pakistan (CBP) which have previously been extended on 2 December, 2022 to hit a $5bn ceiling, confirming the Kingdom’s position supportive to the economy of the Islamic Republic of Pakistan and its sisterly people,” the statement added.

The financial assistance being discussed is part of the communications between Saudi’s crown prince and “sisterly republic” Pakistan’s prime minister Shehbaz Sharif, said Saudi Press Agency.

Islamabad’s allies – the UAE and Qatar – have pledged help to Pakistan through potential loans and investments from Gulf nations. The financial assistance to Pakistan has now reached at least $22bn after the latest tranche from Riyadh.

This comes as international donors poured in over $9bn of funds as financial aid for Pakistan, including $1bn from Saudi Arabia, as the country grappled with a domestic and foreign financial crisis.

The flood-hit nation has been helped by the US and France, after pleas from the country’s prime minister and United Nations chief Antonio Guterres.

Some of the biggest donors helping Pakistan to recover from the massive floods include the Islamic Development Bank, the World Bank and Saudi Arabia.

Pakistani deputy foreign minister Hina Rabbani Khar has said the international donations meet half of the estimated $16.3bn needed to respond to the flooding. The rest is expected to come from the Pakistani government itself.

Top officials monitoring Pakistan’s internal crisis have said that the Sharif administration knows the donors will seek outcomes such as in the accountability, clarity, efficiency, transparency and effectiveness of the programmes that will be funded.

“There is no free money. And everybody who pledged their contributions today will come with certain expectations,” Achim Steiner, the head of the UN development programme said in an interview.

He added that while the needs are urgent now, Pakistan’s recovery and resilience projects should be built to last for this era increasingly marked and threatened by climate change.

The unprecedented floods in Pakistan last year were caused by several factors, including melting glaciers and record monsoon rains, with researchers finding climate crisis and infrastructural vulnerability playing a big role.

The flooding impacted more than 33 million Pakistanis, killing more than 1,700 people and pushing about nine million others into poverty, according to the UN.