Islamabad, Dec 6:Saudi Arabia has extended Pakistan’s repayment period for a $3 billion loan by another year after Pakistan was unable to settle the debt, according to the State Bank of Pakistan (SBP).
The Express Tribune reported that Saudi Arabia extended the deposit, initially provided in 2021 for a one-year term, in 2022 and 2023 under royal directives that reflect the strong ties between the two countries.
This marks the first in a series of debt extensions Pakistan requires to manage over $13 billion in repayments to Saudi Arabia, China, and the UAE by June next year.
Finance Ministry sources expect Saudi Arabia to roll over a separate $2 billion deposit maturing in mid-2024.
The SBP announced on the repayment deadline that the Saudi Fund for Development (SFD) had extended the $3 billion deposit until December 5, 2024. This third extension follows similar commitments made by former Prime Minister Imran Khan and current Prime Minister Shehbaz Sharif to settle debts on time.
Saudi Arabia Extends $3 Billion Loan
Pakistan and the International Monetary Fund (IMF) have sought to secure rollovers from bilateral creditors such as Saudi Arabia, China, and the UAE to prevent sovereign default. However, obligations to multilateral creditors like the World Bank (WB), Asian Development Bank (ADB), and IMF are consistently met.
Pakistan owes 45% of its external public debt to bilateral creditors, with China as the largest lender. Multilateral creditors account for another 45%, led by the World Bank with a $20 billion exposure.
The World Bank’s debt report revealed that Pakistan’s growing debt and interest payments have worsened its financial challenges, noting it made the second-highest interest payments in the region.
The SBP stated that Saudi Arabia’s support will bolster Pakistan’s foreign exchange reserves and contribute to economic growth. Over the next six months, Pakistan faces at least $13 billion in repayments to bilateral creditors, including $8 billion to China. These include cash deposits such as $2 billion due in March, a $500 million commercial loan due in both March and April, and $2.4 billion in June.
China remains Pakistan’s largest bilateral creditor with nearly $29 billion in loans, while Saudi Arabia ranks second with $9.2 billion. As of 2023, Pakistan’s total external debt stood at approximately $131 billion, representing 352% of its exports, with debt servicing consuming 43% of total export revenues.
Pakistan has also requested China to reschedule $3.4 billion of official and guaranteed debt maturing during the IMF program period. This rescheduling is essential to closing a $5 billion financing gap identified during the September bailout agreement with the IMF.
