The key facts

  • Saudi Arabia extended the $3 billion loan rollover to Pakistan for a 'reasonable period,' Finance Minister Muhammad Aurangzeb said
  • The loan was provided in April to help repay $3.5 billion of debt to the UAE; the three-month term expired on October 31
  • According to Anadolu, prospects for the $10 billion ESSF support requested from the US have weakened, but Pakistan gained market access through a September $3 billion bond issuance

Extension of Saudi financing

Saudi Arabia has extended a $3 billion loan provided to Pakistan for a 'reasonable period.' Pakistan's Finance Minister Muhammad Aurangzeb announced this on Wednesday at a briefing in Islamabad. 'It has been extended, and for a reasonable period. You don't need to worry about how long, given the strategic relationship we have,' he said, as quoted by the Turkish Anadolu agency.

Background of the deal

The loan was provided in April to help Pakistan cope with the repayment of a $3.5 billion debt to the United Arab Emirates — Abu Dhabi had demanded immediate repayment at the time. The three-month term of the financing expired on October 31, and the extension allowed Pakistan to avoid repaying the funds at a time when the country's reserves are under pressure. Earlier, Riyadh also extended a separate $5 billion credit line until 2028. Aurangzeb added that he had held 'a very good meeting' with his Saudi counterpart Mohammed al-Jadaan on the sidelines of the recent World Bank and IMF meetings in Bangkok.

US support in question, but market access is open

The extension of the Saudi loan comes as, according to Anadolu, the prospects for the $10 billion support Pakistan requested from the US in July — the so-called Exchange Stabilization Support Facility (ESSF) — have weakened. Aurangzeb, however, emphasized that Islamabad had primarily sought market access from the start: 'We have accessed the market,' he said, referring to the September $3 billion bond issuance that attracted $6 billion in orders. According to the minister, if the ESSF is nevertheless implemented, it would be a 'wonderful' liquidity support tool; otherwise, Pakistan plans further issuances of eurobonds, 'pandabonds,' and rupiah-denominated bonds settled in dollars.

Debt targets and reserves

Pakistan aims to reduce its external debt by $4 billion in the current fiscal year and by $3.5 billion in the next — compared with $4.5 billion last year. The country's liquid foreign exchange reserves stand at about $26.86 billion: $21.47 billion held by the State Bank of Pakistan and roughly $5.41 billion by commercial banks.