In a positive development for the country’s external sector, Pakistan and Saudi Arabia signed on Monday an agreement for the deposit of $3 billion in the State Bank of Pakistan (SBP).

As per a statement by the SBP, the agreement was signed by the Chief Executive Officer of Saudi Fund for Development (SFD) H.E. Sultan Bin Abdul Rahman Al-Marshad and the SBP Governor Dr Reza Baqir at SBP in Karachi.

“Under this deposit agreement, SFD shall place a deposit of $3.0 billion with SBP. The deposit amount under the agreement shall become part of SBP’s Foreign Exchange Reserves,” read the statement.

The deposits will help support Pakistan’s foreign currency reserves and contribute towards resolving the adverse effects of the Covid-19 pandemic, it added.

The deposit comes at a time when the rupee hit a new historic low against the US dollar in the inter-bank market on Monday with foreign currency reserves held by the SBP also falling by nearly $700 million on a weekly basis. Many see the inflows from Saudi Arabia as a positive for the currency market.

“The deposit agreement reflects the strong and special relationship between the Kingdom of Saudi Arabia and Pakistan and will further augment the economic ties between the two brotherly countries,” concluded the statement.

Last month, SFD announced the issuance of the Royal Directive to deposit an amount worth $3 billion into the central bank of Pakistan “to help the Pakistani government support its foreign currency reserves and support it in facing the impacts of the coronavirus pandemic”.

In addition, the SFD said that the royal directive was also issued to finance the oil derivatives trade with a total amount of $1.2 billion throughout the year.

The $4.2 billion Saudi financial assistance for Pakistan came after Prime Minister Imran Khan's three-day visit to KSA, to attend the launch of the Middle East Green Initiative (MGI) Summit held in Riyadh.