In a major relief to debt-ridden Pakistan’s struggling economy, Saudi Arabia has extended the term of its $3 billion deposit with the country's central bank for another year, according to an official announcement.

The State Bank of Pakistan (SBP), which is also known as Pakistan's central bank, said that the decision by the Saudi Fund for Development (SFD) was taken just prior to the maturing date of the $3 billion deposit that was due on December 5, 2023.

“The Kingdom of Saudi Arabia extends term for a $3 billion deposit placed with Pakistan to support Pakistan’s economy. The Saudi Fund for Development (SFD) on behalf of the Kingdom of Saudi Arabia has extended the term for the deposit of $3 billion maturing on 05 December 2023 for another year,” the SBP said in a statement.

It stated that the amount has been placed with the SBP on behalf of Pakistan and the extension of the term of the deposit is a continuation of the support provided by Saudi Arabia to Pakistan, which will help to maintain the foreign currency reserves of Pakistan and contribute to the economic growth of the country.

The agreement of the $3 billion deposit was initially signed through the SFD with the SBP in the year 2021 and rolled over subsequently in 2022, after the issuance of the royal directives that reflect the continuation of the close relationship between the two brotherly countries.

Geo News reported an expert as saying that the extension in the deposit term would help solidify the ongoing IMF programme as the fund was seeking confirmation from lenders and friendly countries of their commitments to Pakistan.

“The $3 billion rollover is an important move in securing $25 billion in gross financing needs estimated by Pakistan for FY-24,” former adviser to the Ministry of Finance Khaqan Najeeb was quoted as saying in a report by Geo TV.

Moreover, the analyst said the rollover will pave the way for the IMF Executive Board’s approval for the second loan tranche of $700 million.

Pakistan’s economy is in dire straits with its foreign reserves depleting quickly amid less inflows from overseas investors, according to Geo.