Pakistan Gets $6 Billion in Saudi Aid at Controversial Investment Conference
By Saeed Shah (Wall Street Journal)
Oct. 23, 2018 3:53 p.m. ET
Assistance will go toward helping country ease a balance-of-payments crisis
ISLAMABAD—Pakistan’s new prime minister came away from a controversial Saudi economic conference with a pledge of at least $6 billion in financial support to help the country over a balance-of-payments crisis, the Pakistani government said.
Imran Khan, elected in July, headlined one of Tuesday’s sessions at the Future Investment Initiative showcase conference in Riyadh, an event from which many Western officials and executives withdrew after the death of Saudi journalist Jamal Khashoggi at the kingdom’s Istanbul consulate this month.
The Saudis claim Mr. Khashoggi’s death stemmed from a spontaneous fistfight with Saudi security officials, but Turkey has alleged it was a premeditated killing.
Saudi Crown Prince Mohammad bin Salman telephoned Mr. Khan last week requesting he attend, the Pakistani government said.
Pakistan began talks about a bailout with the International Monetary Fund this month. It is still expected to take the IMF loan, but the Saudi aid helps its negotiating position, Pakistani officials said. Pakistan needs around $12 billion to plug its financing gap, the government said.
It was unclear whether there was a geopolitical price for the Saudi aid. Mr. Khan in September had also visited Saudi Arabia, hoping for financial assistance, but none was announced at that time, and a Pakistani minister suggested that the obligations with any Saudi money would conflict with Pakistan’s “strategic interests.”
In 2015, Pakistan declined a request from Riyadh to join the Saudi-led war against Houthi rebels in Yemen. However, Islamabad subsequently sent 5,000 soldiers to Saudi Arabia to bolster the country’s domestic defenses.
Mr. Khan used his visit to the conference to hold meetings with Saudi King Salman and the crown prince.
The web of economic ties between the U.S. and Saudi Arabia is so complex that it can complicate diplomacy in times of turmoil. WSJ’s Shelby Holliday looks at the various ways the U.S. and Saudi Arabia are economically intertwined.
Under the deal, Pakistan will receive a $3 billion deposit at its central bank for a year, as a balance-of-payments support, Pakistan’s foreign ministry said. In addition, Pakistan will be able to import as much as $3 billion of oil from Saudi Arabia on a deferred-payment basis over the next three years.
Mr. Khan inherited an economy with a runaway balance-of-payments deficit, which has depleted the country’s foreign exchange reserves to critical levels. Pakistan has around $8 billion in foreign-exchange reserves, while the country says debt repayments this financial year amount to $9 billion. The trade deficit also has to be financed.
The Pakistani prime minister admitted that the country was “desperate” for funds on the eve of his trip to Saudi Arabia, in an interview with the Middle East Eye website, saying he had no option but to go to ask for help from Saudi Arabia. He described the journalist’s death as “sad beyond belief” in the interview, published on Monday.
“Unless we get loans from friendly countries or the IMF, we actually won’t have in another two or three months enough foreign exchange to service our debts or to pay for our imports. So we’re desperate at the moment,” Mr. Khan told Middle East Eye.
Separately, Islamabad is talks with Saudi Arabia about building a multibillion-dollar refinery at Pakistan’s newly developed port of Gwadar, and Saudi investment in major mining projects in Pakistan.
While Islamabad has long been close to Saudi Arabia, it has also been careful not to antagonize Riyadh’s regional rival Iran, with which Pakistan shares a long and largely peaceful border. Pakistan’s other two major borders, with Afghanistan and India are tense, with hundreds of thousands of Pakistani soldiers mobilized there.
Write to Saeed Shah at email@example.com