By Hasan Salahuddin

Saudi Arabia’s $3 billion financial support has strengthened Pakistan’s foreign exchange reserves at a time when the country is managing significant external repayment obligations and broader external sector pressures.

The inflow, which has already been received, comes alongside ongoing rollover arrangements and provides immediate support to Pakistan’s external position amid volatility in global energy markets linked to tensions in the Middle East.

This support has boosted Pakistan’s external buffers, giving policymakers limited space to manage near-term financing needs and stabilise the country’s external account.

As of April 10, 2026, Pakistan’s total liquid foreign exchange reserves stood at $20.52 billion, including $15.08 billion held by the State Bank of Pakistan (SBP) and $5.45 billion by commercial banks, according to official SBP data. With the recent Saudi inflow, the reserve position is expected to strengthen further, partially offsetting pressures from external repayments.

Pakistan has already repaid a substantial portion of the $3.5 billion deposit to the United Arab Emirates, with the remaining amount expected to be settled within days. The repayment, which departs from earlier rollover practices, has added to short-term financing requirements, even as it is being partly supported by fresh inflows.

Despite the improvement in reserves, the external position remains under pressure. A decline in reserve levels following repayments could complicate Pakistan’s ability to meet its International Monetary Fund (IMF) reserve targets, which, according to IMF documents, are projected at $17.7 billion by the end of June 2026. Lower reserves also reduce import cover and increase exposure to external financing risks.

External vulnerabilities are further reflected in the widening trade imbalance. During the first nine months of FY26, Pakistan’s trade deficit increased by 23.13% year on year, as exports declined by 7.99% while imports rose by 6.89%, according to data from the Pakistan Bureau of Statistics.

In this context, Saudi financial support provides near-term stability by strengthening reserve levels and easing immediate financing constraints, though it does not eliminate underlying external risks.

Dr. Qais Aslam, Professor of Economics at the University of Central Punjab, Lahore, told Wealth Pakistan that the inflow has come at a critical time when Pakistan’s external position is under strain.

He noted that the support helps offset pressures arising from external repayments, supports compliance with IMF reserve benchmarks, and enables the country to continue financing essential imports required for economic activity.

Dr. Muhammad Rovidad, Assistant Professor at Forman Christian College University, Lahore, said the $3 billion support should be viewed as a temporary liquidity measure rather than a structural improvement in external earnings.

He explained that the deposit adds to reserves but remains a liability that will require repayment or rollover upon maturity. While it helps stabilise the rupee, improves market sentiment, and supports IMF programme conditions in the short term, it does not address underlying weaknesses in the external account.

He emphasised that long-term stability depends on increasing export competitiveness and generating sustainable foreign exchange inflows, rather than relying on external borrowing.

Dr. Maria Karim, Assistant Professor of Economics at the University of Lahore, said the support provides immediate relief by strengthening reserves, reducing short-term financing pressure, and supporting investor confidence.

She added that such inflows can complement broader external financing efforts if accompanied by structural reforms, including export promotion, investment inflows, and measures to reduce dependence on repeated external support.

While Saudi Arabia’s financial assistance has eased immediate pressure on Pakistan’s external account, analysts agree that sustainable stability will depend on the country’s ability to strengthen its export base, attract productive investment, and maintain macroeconomic discipline.

Credit: INP-WealthPk