Saudi Arabia’s Crown Prince Mohammed bin Salman said his country signed so-called memorandums of understanding worth $20 billion of investment in Pakistan.
“We are creating a great future for Saudi Arabia and Pakistan,” Prince Mohammed said at a reception by Prime Minister Imran Khan after the kingdom’s de facto ruler reached Islamabad on Sunday on a two-day trip. The two nations signed investments deals in energy and agriculture sector including setting up a $10 billion oil refinery in southwestern city of Gwadar.
Prince Mohammed’s investment plans may help premier Khan’s efforts to revive an economy hurt by widening current account and fiscal deficits. Saudi Arabia has already given a $3 billion loan to Pakistan, while the United Arab Emirates provided $1 billion as part of its $3 billion balance of payment support that helped south Asia’s second biggest economy avert a financial crisis.
The Saudi support comes as Pakistan has stalled in its negotiations with the International Monetary Fund over proposed reforms, though Finance Minister Asad Umar said this month the nation is close to signing a bailout package to help ease its balance-of-payments crisis and boost dwindling foreign reserves.
The Saudi “investment and infrastructure projects should provide a welcome supply-side boost” to the economy, said Bilal Khan, a senior economist at Standard Chartered Plc in Dubai. However, “addressing the country’s twin deficits will require fiscal and monetary policy action, likely under an IMF program.”
The visit comes as Khan was one of the few prominent foreign dignitaries who attended the Future Investment Initiative in Riyadh last year after it emerged that Jamal Khashoggi, a Saudi critic, was killed inside the kingdom’s consulate in Istanbul. Pakistan publicly supported Saudi Arabia in the wake of global outrage following Khashoggi’s murder.
While both nations have been long-time staunch allies, relations took a hit four years ago after Pakistan refused a Saudi request for support in the Yemen conflict. Saudi Arabia has also long been accused of funding and spreading extremist Islamic ideology across Pakistan.