Saudi Arabia has extended the rollover of its $3 billion financing to Pakistan for a “reasonable period”, Finance Minister Muhammad Aurangzeb said. Speaking to reporters in Islamabad, he said the government did not need to worry about the length of the extension, given the strategic relationship between the two countries. He did not give a fixed end date. The move keeps Saudi financing for Pakistan in place at a time when another expected source of support from Washington looks less certain.
Why the Saudi financing was arranged
The money was provided in April to help Pakistan meet a $3.5 billion debt repayment to the United Arab Emirates (UAE), which had asked for immediate repayment. The facility helped Pakistan shore up its declining foreign exchange reserves after the UAE's unexpected move. It matured on October 31 under its three-month term, and the extension was announced after that date.
Riyadh had earlier extended a separate $5 billion facility until 2028. Aurangzeb said he held a very productive meeting with his Saudi counterpart, Mohammed Al-Jadaan, on the sidelines of the World Bank and International Monetary Fund (IMF) meetings in Bangkok. The IMF is the global lender that Pakistan has worked with under a multi-year programme.
US facility, bonds and market access
The minister also discussed a $10 billion Exchange Stabilization Support Facility (ESSF) that Pakistan requested from the United States in July. He said the original aim had been market access, and added, “We have got the market access.” He pointed to a $3 billion bond issued in September, which attracted orders worth $6 billion.
Aurangzeb said that if the ESSF materialises, it would act as a liquidity support facility, meaning short-term cash support. Otherwise, he said, the government has plans for more Eurobond issuance, which are dollar bonds sold to international investors, as well as a Panda bond, which is issued in China's currency, and a rupee-linked dollar-settled bond.
Debt targets and reserves
Pakistan is targeting a reduction of $4 billion in its external debt during the current fiscal year, and a further $3.5 billion next year. In the previous fiscal year, the figure was $4.5 billion. Liquid foreign exchange reserves stand at about $26.86 billion. Of this, $21.47 billion is held by the State Bank of Pakistan (SBP), the central bank, and about $5.41 billion by commercial banks. These figures are approximate.
Timeline: what has happened so far
- April: Saudi financing was provided to help Pakistan meet a $3.5 billion repayment to the UAE, which Pakistan made in April.
- July: Pakistan requested a $10 billion ESSF from the United States.
- September: Pakistan issued a $3 billion bond that drew orders worth $6 billion.
- October 31: The Saudi facility matured under its three-month term.
- Wednesday: Aurangzeb told reporters in Islamabad that the Saudi financing had been extended for a reasonable period.
Aasan alfaaz mein
Saudi Arabia ne Pakistan ko di gayi 3 billion dollar ki financing ko ek munasib muddat ke liye barha diya hai, aur Finance Minister Muhammad Aurangzeb ke mutabiq is ki muddat ki fikar ki zaroorat nahi. Yeh financing October 31 ko muddat poori hone ke baad barhai gayi hai. Is se reserves mazboot rehne mein madad mil sakti hai, lekin petrol, bijli ya bill ki qeemton mein tabdeeli ka koi faisla is khabar mein nahi bataya gaya.
