Pakistan has repaid Saudi Arabia $ 1 billion on a $ 3 billion loan it obtained a year and a half ago to avoid default on international debts after the kingdom decided to reduce its financial support, senior sources said.
Pakistan’s tried friend China immediately stepped forward and granted a $ 1 billion loan to help Islamabad avoid any negative impact of the partial withdrawal of the Saudi lifeline, ministry sources said. Finance and State Bank of Pakistan (SBP). L’Express Tribune Wednesday.
Officially, the finance ministry declined to comment while the response from the SBP’s chief spokesperson was also awaited until the story was filed.
In October 2018, Saudi Arabia agreed to provide Pakistan with $ 6.2 billion for three years. This included $ 3 billion in cash assistance and $ 3.2 billion in annual oil and gas supply on deferred payments. The Saudi oil installation was already in trouble.
In accordance with the agreement, the Saudi oil and liquidity facility was for a term of one year with an option to roll over the amount at the end of the year for a period of three years. Pakistan was paying 3.2 percent interest on the $ 3 billion facility, according to information the finance ministry shared with the National Assembly.
In its April report this year, the International Monetary Fund (IMF) said that “Saudi Arabia also refinanced $ 3 billion in balance of payments support loans that matured in November ( 2019) to January (2020) “.
However, the repayment of a $ 1 billion loan within six months of its renewal was surprising.
The same IMF report also stated that “bilateral creditors have maintained their exposure in accordance with the debt sustainability objectives of the IMF program.”
China maintained its exposure by renewing $ 2 billion in bilateral deposits in March this year, while the United Arab Emirates (UAE) also renewed $ 1 billion in BOP support loans in March, according to the IMF Rapid Financing Instrument (RFI) loan approval report.
The IMF attaches importance to refinancing all of the $ 14.5 billion in debt for Pakistan’s debt sustainability that the Pakistani government Tehreek-e-Insaf (PTI) had guaranteed after coming to power to avoid the default on international debt.
“Debt sustainability is supported by the agreed refinancing of maturing bonds by major bilateral creditors (China, Saudi Arabia and United Arab Emirates), as evidenced by track records established over the past nine months,” according to the report. of April from the IMF.
Sources at the finance ministry said those countries also independently assured the IMF that they would not withdraw their financial support to Pakistan.
The IMF believes that the renewal of these loans is also essential to reduce gross financing needs to 19.5% of GDP by fiscal year 2025.
In his “Zero Point” column, The Express News presenter Javed Chaudhry also wrote that as Pakistan shifted its political map, sister Islamic country Saudi Arabia withdrew its financial support for the country. Pakistan. Chaudhry pointed out the lack of cooperation from Muslim countries in his article.
Sources said the Chinese government granted Pakistan a billion dollar loan to keep official gross foreign exchange reserves at current levels. Unlike the Saudi loan which was taken off the books of the central bank, the Chinese loan was taken off the books of the federal government due to another IMF condition.
After securing a $ 6.2 billion facility in 2018, including $ 3 billion in cash, Pakistan’s foreign ministry also said the arrangement would be in place for three years, which will be reviewed later. Pakistan received the first tranche of $ 1 billion in November 2018, the second tranche of $ 1 billion in December 2018 and the third tranche of $ 1 billion in January 2019.
Pakistan could also use a Saudi oil and gas credit facility worth $ 770 million on deferred payments in the last fiscal year, against the sanctioned annual limit of $ 3.2 billion. Oil division spokesman Sajid Qazi said falling crude oil prices coupled with weak demand has had an impact on the facility, hoping the numbers will improve once things get back on track. to normal.
Prime Minister Imran Khan had visited Saudi Arabia twice to secure the deal – a trip his close aide Raza Dawood called “horrific”.
The Saudi facility has faced roadblocks from the start. Initially, the two countries planned to make the facility operational from January 2019. But it actually became operational from July of last year.
The United Arab Emirates (UAE) also announced a $ 6.2 billion program for Pakistan in December 2018, including a $ 3.2 billion oil facility. But later, the UAE reduced its financial aid to $ 2 billion and also suspended plans to provide a $ 3.2 billion oil facility on deferred payments.
The oil credit facilities of the United Arab Emirates and Saudi Arabia were part of the $ 14.5 billion package agreed with three friendly countries, including China.
The PTI government contracted more than $ 13 billion in foreign loans in the previous fiscal year – the second-highest in history – to repay maturing foreign debt and cushion the decline in foreign exchange reserves. Since taking office, the PTI government has received a loan of $ 26.2 billion and of this $ 19.2 billion has been used to repay maturing external debt and the balance has been added to external debt public and guaranteed by the State.