Pakistan has asked Saudi Arabia to extend its support by providing an additional $1.5 billion loan on top of the existing $5 billion loan portfolio. This extra funding is crucial for meeting the external financing requirements needed to secure a 37-month bailout package from the International Monetary Fund (IMF).
The IMF has stipulated that Pakistan must confirm the rollover of $12 billion in loans from its three major bilateral partners—Saudi Arabia, China, and the UAE—before it can approve the bailout. Currently, Saudi Arabia’s commitment stands at $5 billion, China’s at $4 billion, and the UAE’s at $3 billion.
According to reports, Pakistan has requested the additional $1.5 billion from Saudi Arabia, which might come as either a bilateral commercial loan or a secure deposit. Saudi Finance Minister Mohammed Al-Jadaan has indicated support for this request, but the final arrangements are still pending.
In parallel, Pakistan’s Finance Minister Muhammad Aurangzeb and his team are seeking further financial support from commercial banks in the UAE and are in talks with Western banks. However, the interest rates offered by these Western banks are less favorable due to Pakistan’s current economic and political climate.
Recent discussions with bank executives from Mashreq Bank and Dubai Islamic Bank, along with meetings with the Saudi finance minister, have shown willingness to provide $300-350 million each for the current fiscal year. These funds may be complemented by sukuk bonds in the following year.
To navigate these financial challenges, the government has formed a committee led by Finance Minister Aurangzeb, which includes Power Minister Awais Leghari and Minister of State Ali Pervez Malik. This committee will lead negotiations with Chinese authorities and energy sector investors, supported by a Chinese financial advisory firm.
Last month, the government began the process of restructuring over $27 billion in debt and liabilities with Saudi Arabia, China, and the UAE. This debt reprofiling, particularly the $12 billion portion, is a crucial condition for the IMF’s $7 billion Extended Fund Facility. Additionally, Pakistan has requested China to reprofile more than $15 billion in energy sector liabilities and to convert coal projects to use local coal, aiming to alleviate fiscal pressures and reduce foreign exchange outflows.
For the current fiscal year, Pakistan’s budget targets $20 billion in foreign borrowing, including a $3 billion rollover from the UAE for balance of payments. The government plans to raise $4 billion through foreign commercial borrowing and $1 billion through international bonds. The IMF board is expected to make a decision on the bailout package in September, which is eagerly awaited as a critical step for Pakistan’s financial stability.
