Saudi Arabia has extended a three billion dollar financing facility to Pakistan, according to a statement from Islamabad. The extension comes after the original three-month term matured on 31 October.
"It has been extended and for a reasonable period. You don’t need to worry as to for how long given the kind of strategic relationship we have," Pakistan’s Finance Minister Muhammad Aurangzeb told reporters in Islamabad on Tuesday.
The financing was initially provided in April to help Islamabad meet a three-and-a-half billion dollar debt repayment to the United Arab Emirates. Abu Dhabi had requested immediate repayment at the time, which led to a sudden decline in Pakistan’s foreign reserves.
Riyadh previously extended a separate five billion dollar facility until 2028. Aurangzeb said he discussed the financial arrangements during a meeting with his Saudi counterpart, Mohammed Al-Jadaan, on the sidelines of recent World Bank and International Monetary Fund meetings in Bangkok.
Prospects of a separate ten billion dollar US backstop facility, requested in July, appear to have waned. Aurangzeb addressed the Exchange Stabilization Support Facility during his briefing to reporters.
“What we asked for back in July and were looking at was the market access,” Aurangzeb said. “We have got the market access.”
He noted that Pakistan successfully issued a three billion dollar bond in September against orders worth six billion dollars. The government is also preparing alternative plans should the US liquidity support facility fail to materialize.
“If that materializes, fantastic, it will be a liquidity support facility. Otherwise, we have plans for further Eurobond issuance, Panda bond issuance and rupee-linked dollar-settled bond,” the minister added.
Pakistan is targeting a reduction of four billion dollars in external debt during the current fiscal year. The country aims to cut another three and a half billion dollars next year, following a reduction of four and a half billion dollars in the last fiscal year.
Official data shows Pakistan’s liquid foreign exchange reserves stand at approximately 26.86 billion dollars. The State Bank of Pakistan holds 21.47 billion dollars, while commercial banks hold approximately 5.41 billion dollars.
