Saudi Arabia extends $3 billion loan rollover - The Express Tribune

Finance Minister Muhammad Aurangzeb said on Wednesday that Saudi Arabia has further extended the $3 billion debt repayment for a 'reasonable period' and said that the country's external position remains comfortable even without a $10 billion US facility.

The $3 billion loan matured in October while Islamabad had requested the $10 billion liquidity support facility in July and hoped for its approval before the end of September.

"If ($10 billion) liquidity support facility comes, fantastic, If it doesn't come, we will, Insha'Allah, continue to work," said the minister in the Parliament House while speaking to the media after attending the Senate Standing Committee on Finance meeting.

While responding to a question, Aurangzeb said that the $3 billion Saudi short-term loan has been rolled over for a "reasonable time" but did not give further details. The sources said that Saudi Arabia has again extended the debt for a shorter period.

"It has been rolled over. You don't need to worry. It has been extended for a reasonable period", said the Minister on the $3 billion debt repayment question.

He said that given Pakistan-Saudi Arabia "strategic relationship you don't need to worry about for how long it is. But it's not an issue".

The minister further explained that Pakistan did not need any further financial assistance from the Kingdom and the country now has three months of import cover with foreign exchange reserves standing at $21.5 billion.

The minister said that the government and the central bank were planning that by the end of this fiscal year the import cover will increase to four months.

Pakistan remains dependent on the rollover of the existing debts by the bilateral and commercial creditors to whom the country owes $10.5 billion this fiscal year.

Saudi Arabia has given $8 billion short-term debt but it has already rolled over the repayment of $5 billion till December 2028.

The minister further said that Pakistan had asked for the liquidity support facility of $10 billion back in July. At that time, we were looking for market access. We got market access in the first week of September, in which we raised $3 billion and the order book was $6 billion, he added.

While sharing his plan sans the US facility scenario, the Finance Minister said that Pakistan would rely on Eurobond issuances, Panda bond issuances, and these dollar-settled rupee-linked bonds.

To a question whether the US authorities had indicated extending the facility, the Finance Minister said that Pakistan made a request - "if that's possible, that's fine; if it's not possible even then it's fine".

The news about a possible $10 billion US stability facility had surprised many and a few had drawn parallel with a similar facility for Argentina. However, the chances of its materialization remained negligible from the beginning.

While responding to another question, the Finance Minister said that the US financial institutions like the Exim Bank and the Development Finance Corporation can support their exporters; they need to support their investors into Pakistan. That is real financing and real credit. This liquidity support facility would just help the sovereign, he added.

To a question regarding maturity of another $5 billion Saudi debt in December 2028 along with other debts, the Finance Minister said that the government was trying to ensure that there is no bunching in any year.

We have structured new debt accordingly and made it a five-and-a-half year Eurobond so that it goes into the next fiscal year, said Aurangzeb.

The Finance Minister further said that the IMF board was tentatively scheduled to approve the two loan tranches valuing $1.2 billion in December.

Headed by Senator Saleem Mandviwalla, the Senate Standing Committee took a detailed briefing on the country's debt profile. The Secretary Finance Imdadullah Bosal said that the arrangements have been made for the current fiscal year's external debt repayments.

Pakistan's external financing requirements for the current fiscal year are $21.5 billion, including $17.5 billion in principal debt repayments, said Bosal.

Out of the $17.5 billion, $10.5 billion would be rolled over by the bilateral and commercial creditors and the net payments of the principal and the interest are $11 billion, the secretary finance added. Bosal said that in the first four months, the $5 billion had already been repaid.

The secretary said that the government was aimed at extending the maturity of the debt, reducing interest expenses and the debt-to-GDP ratio.

Bosal briefed the committee that compared to 75% debt to GDP ratio in 2023 and 28% annual increase, the debt burden has dropped to 68% and the annual increase slowed down to 7.7%.

However, the committee members were of the view that a key reason for slower accumulation of the debt was the stable exchange rate that has helped stem the increase in the debt burden.

The primary budget surplus for the consecutive three years has contained the increase in the debt-buildup, said Bosal.

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