Imran Khan and Prince Mohammed Bin Salman hold talks in Riyadh. File
The South Asian country has faced growing economic challenges, with high inflation, sliding forex reserves, a widening current account deficit and a depreciating currency.
Pakistan’s total liquid foreign reserves stand at $22,498 billion, based on central bank data.
Shaukat Tarin, finance adviser to Prime Minister Imran Khan, said in a tweet: “I want to thank His Excellency Crown Prince Mohammed Bin Salman and Kingdom of Saudi Arabia for the kind gesture.”
The loan from Saudi Arabia will be for one year at a 4% interest rate under the terms of the package, which was signed last month.
“This is positive news ... and will help bolster both the foreign exchange reserves and sentiments in the forex market,” Saad Hashemy, executive director at BMA Capital said.
The loan comes a week after the International Monetary Fund (IMF) agreed with Pakistan on measures needed to revive a stalled $6 billion funding programme.
The completion of the review, pending since earlier this year, would make available $750 million in IMF special drawing rights, or around $1 billion, bringing total disbursements so far to about $3 billion.
Pakistan’s central bank has raised its benchmark interest rate by 150 basis points to 8.75% to counter inflationary pressures.
Inflation had reached 11.5% in November, up from 9.2% a month earlier.
The Pakistani rupee, which closed on Friday at 176.77 at inter-bank against a dollar, has depreciated more than 11% since the start of this year.
Pakistan will end most exemptions on sales tax so that all sectors pay a uniform 17% as part of a package of belt tightening measures aimed at securing approval for a $1 billion tranche of IMF funding, officials said on Friday.
As well as withdrawing sales tax exemptions worth around Rs300 billion ($1.70 billion) a year, officials said a supplementary budget next week would also cut development spending. The measures will add further pressure on consumers already squeezed by galloping inflation and a sliding currency.
The IMF agreed last month to revive a stalled $6 billion funding programme but demanded further budgetary tightening from Pakistan before the next tranche worth some $1 billion could be approved.
"We've sent $1 billion to Saudi Arabia," he said. Another $1 billion will be repaid to Riyadh next month, a foreign ministry official said. Islamabad had returned $1 billion in July.
Prime Minister Imran Khan told a foreign TV that his government and the Pakistan army have the most harmonious relationship and noted that in the past, civilian and military leaderships had had a chequered relationship.
"Pakistan fully supports the kingdom with all its capacities in confronting these sabotage acts," the state news agency cited him as saying during a meeting with Saudi Crown Prince Mohammed Bin Salman, in the Red Sea port city of Jeddah.
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