The Saudi Fund for Development (SFD), on behalf of the Kingdom of Saudi Arabia, has extended the term for the deposit of $3 billion maturing on December 5, 2024, for another year, the State Bank of Pakistan said on Thursday.

This development followed by Prime Minister Shehbaz Sharif and Saudi Arabia Crown Prince Mohammad Bin Salman’s meeting during the former’s visit to Riyadh two days ago on the sidelines of the “One Water Summit”.

During the meeting, both leaders had agreed to bring about a qualitative change in the economic, trade and investment relationship between the two countries.

They also expressed satisfaction at the pace of progress in the implementation of Saudi MoUs and agreements regarding investment in Pakistan.

In its statement today, the central bank said: “The said amount has been placed with State Bank of Pakistan on behalf of Islamic Republic of Pakistan.”

“The extension of the term of the deposit is continuation of the support provided by the Kingdom of Saudi Arabia to the Islamic Republic of Pakistan, which will help in strengthening the foreign exchange reserves of Pakistan and contribute to the country’s economic growth and development,” it added.

It is worth noting that the $3 billion deposit agreement was initially signed with SFD in the year 2021 and subsequently rolled over in 2022 and 2023, after the issuance of the royal directives that reflect the continuation of the close relationship between the two brotherly countries, as per the central bank.

Alongside getting financial aid from the kingdom, Pakistan had signed several memorandum of understandings (MoUs) worth $2 billion in October to boost bilateral trade and investment with Saudi Arabia.

The agreements were inked during a three-day visit paid by a high-level Saudi delegation led by the kingdom’s investment minister.

The agreements included a $70 million investment in agriculture sector, establishment of advanced semiconductor chip manufacturing in Saudi Arabia, establishment of a textile industry, a white oil pipeline project, an MoU for exploring investment opportunities, a hybrid power project, development of transformer manufacturing facilities in both the countries, cyber security measures for customers and businesses, and the export of spices and vegetables from Pakistan.

Additionally, the agreements outline the establishment of a manufacturing facility for surgical and dental equipment and collaboration on the federal government’s E-Taaleem and digitalisation programmes.

The country was on the brink of default in 2022, but it was averted after the International Monetary Fund (IMF) approved a short-term bailout with strict conditions — pushing the inflation up as Pakistan underwent several structural reforms, which saw an increase in gas, energy, and fuel prices.

Later in September this year, the Fund’s Executive Board had approved a $7 billion for Pakistan under its Extended Fund Facility (EFF) and disbursed first tranche of $1.1 billion.

Islamabad has relied heavily on IMF bailout for years, at times nearing the brink of sovereign default and having to turn to countries such as the United Arab Emirates and Saudi Arabia to provide it with financing to meet external financing targets set by the IMF.