China has agreed to provide Pakistan with $1.5 billion financial support immediately in order to pay off Saudi-Arabia’s debt.
Pakistan has to pay Saudi-Arabia $2 billion dollars.
Sources within the finance ministry and the State Bank of Pakistan (SBP) told news outlets that Pakistan is ready to pay back Saudi-Arabia the money it had borrowed.
Pakistan is expected to pay back $1 billion dollars that remain in January next year.
Read more: Op-ed: Is Saudi Arabia sending mixed messages to Biden?
The help from China does not, however, as per sources within the finance ministry, come from its State Administration of Foreign Exchange, or as a commercial loan but as an increase in the size of a 2011 bilateral Currency-Swap Agreement (CSA).
China steps in to help Pakistan return Saudi loan
The CSA had been reached between the SBP and the Peoples Bank of China (PBOC) in December 2011 in order to promote bilateral trade, finance direct investment, and provide short-term liquidity support.
Read more: Is Saudi Arabia pressing Pakistan to recognize Israel?
Thus the additional $1.5 billion will not be added to the federal government’s current accounts; as it will not be treated as public debt.
In August, Pakistan repaid $1 billion of the $3 billion loans taken from Saudi Arabia. To offset the negative effects of Saudi Arabia’s decision to cut funding, China had stepped in to provide Pakistan $1bn loans.
In 2018, Saudi Arabia had agreed to give Pakistan $3 billion in foreign currency support for a year and a further loan worth up to $3 billion in deferred payments for oil imports to help stave off a current account crisis.
Saudi Arabia had denied a rollover of $2 billion
Official sources confirmed last month that Islamabad had forwarded a formal request for granting a rollover of $2 billion to the Kingdom of Saudi Arabia with the hope that this arrangement would continue for another year under the requirement of the IMF program. The formal response is still being awaited from KSA, official sources said.
Read more: Understanding Saudi Arabia: A country cloaked in secrecy
Saudi Arabia had denied the rollover, as reported by The News, and since then the Chinese government has stepped in to provide $1.5 billion dollars.
When contacted, the official sources said that when Islamabad had forwarded its formal request, there was a hope that Riyadh would grant another rollover.
GVS News Desk