China to Bailout Pakistan After Saudi Arabia Refuses Rollover Request

China has agreed to bailout Pakistan again with an agreement to provide $1.5 billion to Pakistan for the repayment of the upcoming installment of $1 billion out of the $3 billion loan from Saudi Arabia.

Pakistan had already repaid $1 billion out of this loan in May 2020, and for that to China had stepped up to provide Pakistan with an equivalent amount of foreign currency to prevent the central bank’s reserves from crashing down.


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The rumors about Saudi Arabia not allowing a delay of remaining loan repayment had been circulating in the media since early November. However, the government officials had been constantly avoiding or downright denying the possibility of KSA’s refusal. During a virtual press conference Federal Minister of Industries and Production, Hammad Azhar, told ProPakistani that Pakistan still had the rollover facility under the International Monetary Fund’s Extended Fund Facility (EFF) without specifying whether this would mean a delay allowed from Saudi Arabia.

Now, news reports have emerged that the Ministry of Finance and the State Bank of Pakistan (SBP) are all set to repay $1 billion to Saudi Arabia today (Monday). The remaining $1 billion, out of the total $2 billion loan, is due to be repaid next month (January 2021).

Saudi Arabia had provided $6.2 billion worth of financial package to Pakistan for three years, $3 billion in cash assistance, and $3.2 billion in deferred payments for oil and gas supply. The original agreement provided the cash facility for one year with an additional option to rollover the payment for three years.

However, instead of any rollover, Saudi Arabia claimed back the repayment even ahead of the original repayment schedule. The oil facility has also been suspended.


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For this current repayment, China has not given a commercial loan, and the offered amount is not from its State Administration of Foreign Exchange (SAFE deposits) either. Rather, this transaction has come as an augmentation to the 2011 bilateral Currency-Swap Agreement (CSA) by an additional 10 billion Chinese Yuan ($1.5 billion), the newspaper reported.

This means that this amount of $1.5 billion will not be added to the external debts in Pakistan’s balance of payments. Pakistan has been using CSA for almost a decade now to maintain its foreign currency reserves as well as repay foreign debt.

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