Saudi Arabia agreed to grant Pakistan $ 3 billion for a period of one year, as the South Asian country faces an economic crisis marked by a growing deficit in the balance of payments and the decline of foreign exchange reserves.
The Gulf kingdom also pledged an additional loan worth up to $ 3 billion in deferred payments for oil imports, the Pakistan Foreign Ministry said in a statement on Tuesday.
The agreement came during a visit by the Prime Minister of Pakistan, Imran Khan, to Riyadh, where he met with King Salman bin Abdulaziz and Crown Prince Mohammed bin Salman.
Khan also attended a high-profile investment conference that opened in the Saudi capital on Tuesday.
"It was agreed that Saudi Arabia will place a deposit of $ 3 billion for a period of one year in support of the balance of payments," said the Foreign Ministry of Pakistan.
The additional deferred payment service for oil imports will be in operation for three years, which will be reviewed later, the ministry said.
Prime Minister's visit to Saudi Arabia: a memorandum of understanding is signed between the Minister of Finance @Asad_Umar and the Saudi Finance Minister, Muhammad Abdullah Al-Jadaan. It was agreed that Saudi Arabia will deposit a deposit of USD 3 billion for a period of one year to support the balance of payments. pic.twitter.com/Rm2fZDSYO7
– PTI (@PTIofficial) October 23, 2018
The government of Pakistan, led by the cricketer turned politician Khan, inherited a wealth of economic challenges when it came to power in July.
Before leaving for Riyadh, Khan said his country is "desperate" for propping up its foreign exchange reserves, which are at a four-year low of 8.4 million dollars..
Pakistan currently faces a balance of payments crisis, with a deficit of almost $ 18 billion, according to the latest figures from the State Bank of Pakistan, while public sector debt is $ 75.3 billion, which is 27 percent of Pakistan's gross domestic product. .
"The immediate concern for our government is to increase exports, strengthen our foreign exchange reserves, have Pakistanis send remittances through banking channels," Khan said during a session at the Future Investment Initiative (FII) conference in Riyadh.
"At the same time, repress money laundering, which is a problem in most developing countries."
Pakistan has a close economic and strategic relationship with Saudi Arabia, which houses at least 1.9 million expatriate Pakistani workers.
The kingdom tops the list of countries with the highest remittances sent to Pakistan.
The agreement comes weeks after Pakistani Finance Minister Asad Umar announced that Islamabad had requested talks with the International Monetary Fund (IMF) in an attempt to ease the economic crisis.
An IMF team will visit Pakistan to begin negotiations on November 7.
If an assistance package is agreed upon, it would be Pakistan's second bailout at the IMF in five years, and 13 since the late 1980s.
During his speech at the business summit in Riyadh, Khan confirmed that Pakistan was also in talks with the IMF for financial assistance.
"At this time we need loans to go through this difficult period of service of our debts," Khan said.
"We hope to do a little of both: get some loans from the IMF and friendly governments," he added. "We have a difficult period for the next three to six months."
The Riyadh summit, dubbed "Davos in the desert", has been overshadowed by growing global outrage over the murder of journalist and critic of the Saudi government Jamal Khashoggi.
The main political leaders and corporate chiefs have rejected the conference in response to the death of Khashoggi at the Saudi consulate in Istanbul, a scandal that has led Riyadh to a diplomatic crisis.
Al Jazeera and news agencies.