ISLAMABAD: Pakistan is to pay four percent annual profit to Saudi Arabia on deposits of $ 2 billion with the State Bank of Pakistan (SBP) for a period of one year, well informed sources told Business Recorder.

Saudi Arabia, sources said, had agreed to deposit $ 2 billion to meet one of the preconditions of International Monetary Fund (IMF) in which Pakistan had been asked to arrange external funding reportedly up to $ 6 billion.

United Arab Emirates (UAE) has also confirmed to the IMF that it would deposit $ 1 billion with the State Bank of Pakistan.

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On May 10, 2023, Finance Division, through an additional agenda item apprised the Federal Cabinet that the Kingdom of Saudi Arabia through its Ministry of Finance had agreed to deposit $ 2 billion with State Bank of Pakistan for a period of 1-year. The annual profit rate proposed was 4 percent.

The sources said draft Deposit Agreement shared by the Saudi side was forwarded to Ministry of Law and Justice and Office of the Attorney General for Pakistan for vetting and clearance in light of the Cabinet decision of May 14, 2019.

According to sources, on approval by the Federal Cabinet, the State Bank of Pakistan would be authorized by the Finance Division, Government of Pakistan to enter into the Deposit Agreement. The Ministry of Law and Justice had cleared the draft Agreement subject to fulfillment of all codal formalities whereas FBR had given concurrence for tax exemption.

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Finance Division sought Cabinet’s approval for the Deposit Agreement and the Authorization Letter in terms of Rule 16(1Xd) of the Rules of Business, L973 read with the observations of the Office of Attorney General for Pakistan.

After brief discussion, the Cabinet gave its nod to the summary titled ‘Deposit Agreement between the Kingdom of Saudi Arabia (through the Ministry of Finance) and the Islamic Republic of Pakistan (through State Bank of Pakistan (SBP) of May 10, 2023,’ submitted by the Finance Division.

The Cabinet authorized the Cabinet Division to issue the decision in the instant case without waiting for the formal approval of the minutes.

Copyright Business Recorder, 2023