China bails out Pakistan to repay $1b Saudi debt

Mehtab Haider

December 14, 2020

China has agreed to immediately provide $1 to $1.5 billion financing line to Pakistan. Photo: Geo. tv/File

China bails out Pakistan again
Last tranche of Saudi debt to be paid next month
Pakistan repaying KSA debt ahead of schedule

ISLAMABAD: China has agreed to immediately provide $1 to $1.5 billion financing line to Pakistan, allowing Islamabad to repay $1 billion to the Kingdom of Saudi Arabia this week.

This is the second time China has come to Pakistan's rescue. Earlier this year, Islamabad repaid $1 billion to KSA in the first quarter of the current fiscal year. With the latest repayment, Pakistan has so far repaid $2 billion out of the total $3 billion debt. Islamabad had paid mark up of over 3 percent on SAFE deposit.

Islamabad is all set to repay the $2 billion Saudi debt in the shape of SAFE deposit tomorrow, top official sources confirmed to The News.

The last tranche of $1 billion will be repaid next month. When contacted, a Ministry of Finance official said "these are bilateral confidential matters".

But a top official privy to the development said the financing arrangement was part of the International Monetary Fund (IMF) programme and the lending body had sought written and verbal guarantees that these bilateral financing arrangements would be rolled over during package period.

IMF Mission Chief for Pakistan Ernesto Ramirez Rigo had flown to Beijing to get Chinese endorsement to make it a part of financing plan at the time of signing of the IMF agreement.

The money had been deposited in State Bank of Pakistan on December 15 2018 with a three years maturity period. Islamabad is repaying the amount ahead of schedule.

With new facility, Pakistan's reliance on China increases. The country's financial account has already turned negative of $1.33 billion because of outflow of dollars.

So far, increased remittances helped Islamabad to avoid an eruption of full fledged balance of payment (BoP) crisis as remittances from abroad remained over $2 billion over the last consecutive five months.