ISLAMABAD - The Saudi Fund for Development (SFD) has extended the term for a deposit of $3 billion to Pakistan for one more year, the South Asian country's central bank said in a statement on Wednesday.

The agreement was initially signed in 2021 and rolled over subsequently in 2022, the State Bank of Pakistan said in a statement.

The deposit into Pakistan's central bank was designed to shore up the cash-strapped country's reserves.

The extension was likely to bolster Pakistan's case in future talks with the International Monetary Fund (IMF) over the staggered release of $3 billion in funding.

"Certainly the rollover helps solidify the IMF agreement as we move closer to meeting the gross financing needs of the country. This should help pave the way for the next tranche of $700 million as the board approval comes through,” Dr Khaqan Hassan Najeeb, a former advisor to Pakistan's ministry of finance, said.

The IMF has made securing external financing a key condition for the deal struck with Pakistan in July, when the South Asian nation was teetering on the brink of sovereign debt default and a balance of payments crisis.

Financing from several countries, including Saudi Arabia, had been critical in getting the deal over the line.

The IMF initially disbursed $1.2 billion under the agreement and after talks in Islamabad struck a staff level agreement that paves the way for the release of another $700 million.

The remaining $1.1 billion will require further talks in coming months before the program comes to an end around March.

(Reporting by Shilpa Jamkhandikar and Charlotte Greenfield; Editing by Sharon Singleton)