In 2018, Saudi Arabia extended a cash and gas and oil payments facility worth a total of $6.2 billion
Pakistan returned US$1 billion loan to Saudi Arabia after the Kingdom reduced its financial support despite the COVID crisis, media reports claimed.
Pakistan took a $3 billion loan a year and a half back. The sudden payment was surprising since the loan was refinanced earlier in January. There is no official word from the Pakistani government on the matter.
Pakistan made the payment to avoid defaulting on an international debt obligation. China made an emergency payment to ensure that Pakistan did not default, the sources added. In October of 2018, Saudi Arabia offered Pakistan a $3 billion cash loan along with a $3.2 billion worth of annual oil and gas supply on deferred payments.
The oil and gas deferred payments arrangement is also said to be in a disarray. As per the terms, the deferred payment facility was for a period of three years. The loan had an annual 3.2% interest rate. As per an International Monetary Fund (IMF) report “Saudi Arabia also refinanced $3-billion BOP (balance of payments) support loans that matured in November (2019)-January (2020).” It is unusual for Pakistan to make a payment within six months of the renewal of the loan.
China continued its exposure by renewing $2 billion worth of bilateral deposits earlier in March. The United Arab Emirates (UAE) also rolled over $1-billion BOP support loans, as per IMF’s Rapid Financing Instrument (RFI) loan approval report.
The IMF sees rollover of all the $14.5 billion worth of debt as important for Pakistan’s debt sustainability. The current government has thus far secured after coming to power as it looked to avoid default on international debt payments.