After the announcement of Saudi Arabia's support package for the country, the Pakistani rupee strengthened against the US dollar by Rs2.26 in interbank trade on Wednesday.

Now the rupee stands at Rs173 against the US dollar.

A day earlier, the US dollar had reached a new hike against rupees soaring to Rs175 in intraday trade.

The Arab kingdom on Wednesday announced its financial assistance to Pakistan under which $3 billion would be deposited in the State Bank and oil worth $1.20 billion would be provided annually on deferred payment.

Advisor to Finance Minister on Finance and Revenue Shaukat Tarin formally announced that Saudi Arabia would provide $4.2 billion to Pakistan to overcome its balance of payment issues and address energy problems faced by the country.

Addressing a press conference along with Federal Minister for Energy Hammad Azhar, the advisor said that out of this amount $3 billion would be placed with the State Bank of Pakistan to help balance of payments and $1.2 billion would be provided as oil supplies on deferred payment. He informed that the rate of interest on the loan would be 3.2 percent.

The advisor said some of the amount had already been released on Tuesday.

Talking about the inflation, the adviser said that oil prices in Pakistan were the lowest as compared to other countries, including regional ones, except the oil producing countries.

He said, keeping in view the purchasing power parity, Pakistan was one of the cheapest countries in the world. "Although income is low, the prices of commodities were also low as compared to the other counties of the world," Tarin said.

The PM's adviser categorically denied having any link between the Saudi Arabia’s this extended facility and International Monetary Fund (IMF) programme.

"The talks with IMF are nearing successful completion," said Tarin, assuring that within couple of days the programme would be finalized. He said that the agreement had already been made before he flew from Washington.

He said with the $4.2b Saudi Arabian Facility and upcoming agreement with the IMF would have positive impact on market, so there should be no uncertainty.

Speaking on the occasion, Azhar informed media the inflation was a global phenomenon as the whole world was passing through commodity cycle. Owing to Covid-19, almost all the countries gave stimulus packages which had paced up economy at a time when production was hit by shutdowns to prevent Coronavirus, he added.

So every country, irrespective of being poor or rich, witnessed hike in commodity prices, he remarked. He also pointed out that oil prices in Pakistan were low, except the oil producing countries, whereas the gas prices were not increased since 2019, which have gone up by five to ten-fold in European countries.

Likewise, he added prices of Urea fertilizer were low whereas the government had to provide Rs450 billion tax relaxations to lower the burden of increasing oil prices in international marker.

He expected that the world commodity cycle would break within around 6 months and the prices in world market would come down leaving positive impact on inflation in Pakistan.

On Financial Action Task Force (FATF), he said that Pakistan has made tremendous progress on two simultaneous plans. He said, the country had completed 26 out of 27 action points of earlier plan and majority of the FATF members had expressed satisfaction made over the remaining one point.

Likewise, out of 7 points of FATF June plan 4 have been completed, which he said was history in FATF to have completed 50 per cent of action plan in first review.