Pakistan secures $12bn debt rollover commitments from China, Saudi Arabia, UAE – Bloomberg

By Staff Reporter

ISLAMABAD: Pakistan has secured commitments from China, Saudi Arabia and the United Arab Emirates to rollover debt for a year, a boost for the nation as it awaits a final approval for its new $7 billion loan program with the International Monetary Fund, Bloomberg reported on Tuesday.

The amount of rollovers will be the same as last year, Finance Minister Muhammad Aurangzeb told reporters in Islamabad after a parliamentary committee meeting. Pakistan has $12 billion in bilateral loans that have been extended for the past few years.

Last month, the finance minister said that Pakistan has initiated a major effort to restructure its debt obligations with key allies, China, Saudi Arabia, and the UAE. Last week, Prime Minister Shehbaz Sharif said he had written a letter to the Chinese government requesting debt reprofiling for Pakistan.

Pakistan has a peculiar financial arrangement with these three countries in the shape of commercial loans and SAFE deposits that are rolled over every year and form a major part of the IMF programme in terms of external financing needs.

The country has now requested the maturity period of these loans — $5 billion from China, $4 billion from Saudi Arabia, and $3 billion from the UAE — to be extended to at least three years, offering greater predictability under the IMF programme.

The government and the International Monetary Fund reached an agreement for a 37-month loan programme in July. Pakistan has relied heavily on IMF programmes for years, at times nearing the brink of sovereign default and having to turn to countries such as the UAE and Saudi Arabia to provide it with financing to meet external financing targets set by the IMF.

Bloomberg reported that Aurangzeb said the government expected to manage a financing gap of as much as $5 billion during the fund’s three-year programme.

The IMF in its statement following the staff-level agreement said the new Extended Fund Facility programme was subject to approval from its executive board and obtaining “timely confirmation of necessary financing assurances from Pakistan’s development and bilateral partners”.