Recently, news reports highlighted that Pakistan was seeking to rollover the $4 billion in loans that it obtained from the Kingdom of Saudi Arabia (KSA) and the United Arab Emirates (UAE) to avoid depleting the foreign exchange reserves.
By November 1, 2020, the mainstream media was rife with the news that Saudi Arabia might refuse to extend the facility to Pakistan, which would have either resulted in another loan from China or extra pressures on the country’s foreign reserves through commercial loans.
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However, on November 11 (today), the Federal Minister for Industries and Production, Hammad Azhar, answering a question from ProPakistani, informed that Pakistan still has the rollover facility and all the news reports stating otherwise are false.
Pakistan still has the rollover facility as was decided under the IMF program. There is a decided schedule for the repayments of such loans, and Pakistan will follow the schedule as it is meant to.
The Federal Minister did not clarify whether Pakistan will be given a cushion of one year to repay the Saudi loan or that Pakistan is not seeking to extend the repayment in the first place. However, from the discussion that followed, it can be gathered that the course of action with regards to the repayment of the loan to Saudi Arabia will be according to the government’s pre-planned policy.
This also implies that irrespective of the timing of the repayment, the foreign reserves of the country will not be adversely impacted – at least not directly as a result of this payment.
The Minister said,
In the past few days, we have seen a completely ridiculous interpretation of the foreign reserves numbers that the State Bank shared. You cannot simply attribute the reserves amounts to the borrowed loans, rather the number that the SBP shared is a sum of all the inflows and outflows that have taken place within a given time frame.
He also commended the actions of the incumbent government and the central bank that have led to a recovery in the foreign exchange reserves.
The loan in concern refers to three loan deposits, worth $1 billion each, that Saudi Arabia provided in November 2019, December 2019, and January 2020. Of these, $1 billion has already been repaid by Pakistan.
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The UAE also loaned Pakistan $2 billion in January and February 2020, which will be maturing early next year. The loans in question will be due for repayment from November 2020 to February 2021.
As of October 23, 2020, the foreign exchange reserves of the State Bank of Pakistan (SBP) stood at $12.121 billion with a significant proportion consisting of foreign loans. Pakistan has received the Extended Fund Facility (EFF) for $6 billion from the IMF, which includes the provision of rolling-over for the aforementioned loans.