Saudi Arabia has given Pakistan more time to repay a $3 billion loan. Pakistan's Finance Minister, Muhammad Aurangzeb, announced the extension on Wednesday (4 November).
“It has been extended and for a reasonable period. You don’t need to worry as to for how long, given the kind of strategic relationship we have,” Aurangzeb told reporters in Islamabad.
This extension is crucial because Pakistan is currently facing a severe cash shortage and struggled to secure a hoped-for $10 billion financial backstop from the United States but this facility appears to have weakened.
In April, the United Arab Emirates (UAE) suddenly demanded that Pakistan immediately repay a $3.5 billion in debt. To keep its cash reserves from collapsing, Pakistan borrowed $3 billion from Saudi Arabia on a short-term, three-month deal.
That the short term Saudi loan was due to mature in October. Instead of forcing Pakistan to pay right now, Saudi Arabia agreed to extend the deadline for a “reasonable period.” The Finance Minister did not disclose the exact new due date, citing the strong strategic relationship between the two countries.
Earlier, Riyadh extended a separate $5 billion financing facility to Pakistan until 2028.
Aurangzeb said he had a productive meeting with his Saudi counterpart, Mohammed Al-Jadaan, on the sidelines of recent World Bank-International Monetary Fund meetings in Bangkok in October.
On the prospects of the $10 billion Exchange Stabilisation Support Facility (ESSF), requested from the United States in July, Aurangzeb said Pakistan's primary objective had been to secure access to international markets.
“What we asked for back in July and were looking at was the market access,” he said.
Pakistan targets reduction in external debt
Pakistan is targeting a $4 billion reduction in external debt during the current fiscal year, followed by a further $3.5 billion reduction next year, compared with $4.5 billion in the previous fiscal year.
The country's liquid foreign exchange reserves stand at approximately $26.86 billion.
Of the total, the State Bank of Pakistan holds $21.47 billion, while commercial banks hold approximately $5.41 billion.
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