Forex deposits stability: Saudi Arabia, UAE agree to extend $4 bn loan

ISLAMABAD: The PTI government has been left with no other option but to seek rollover of $4 billion deposit loans obtained from the Kingdom of Saudi Arabia and United Arab Emirates (UAE) for another year in order to avoid dwindling of foreign exchange reserves, it was learnt.

Top official sources confirmed to The News on Wednesday that Pakistan decided to seek rollover of $4 billion loans for another year under the arrangement of IMF programme because Islamabad could not afford to pay back the outstanding loans upon its maturity at this stage.

“These two countries are ready to rollover outstanding loan amount of $4 billion,” a top official of Finance Ministry confirmed to The News on Wednesday. When asked whether KSA and UAE are ready to rollover of $4 billion loans, he replied, “Yes, InshaAllah”.

Pakistan has kick-started its hectic lobbying to secure rollover of $4 billion loan deposits from the Kingdom of Saudi Arabia and UAE that would be maturing from November to February period of the current fiscal year. The KSA provided $1 billion deposits loan in November 2019 and another $1 billion in December 2019. The third tranche of $1 billion was provided in January 2020. Now the KSA had already got back $1 billion, so the remaining $2 billion were still lying with the State Bank of Pakistan. On the other hand, the UAE had provided $2 billion loan deposits in January and February 2020 so these would be maturing in the beginning of next calendar year.

Now Islamabad would have to seek rollover of $7 billion from three countries including China, KSA and the UAE to the tune of $3 billion, $2 billion and $2 billion respectively.

Pakistan’s foreign currency reserves held by the State Bank of Pakistan (SBP) stood at $12.121 billion till October 23, 2020 and major chunk of reserves consist of outstanding loans.

Pakistan and the IMF had struck $6 billion under Extended Fund Facility (EFF) and this programme had agreed external financing of rollover of loans from KSA, UAE and China for three years period. So any deviation from this arrangement could aggravate difficulties for both sides for making arrangements on account of external front. 

The IMF had projected gross external financing requirement to the tune of $29 billion for the ongoing financial year but the independent economists did not agree with this figure arguing that the IMF always overstated figures to use it as tactics for convincing the country to remain within the fold of IMF programme.