Pakistan returns $1 billion of Saudi Arabia's soft loan, officials say

By: News Desk      Published: 01:30 AM, 17 Dec, 2020
Pakistan returns $1 billion of Saudi Arabia's soft loan, officials say
Prime Minister Imran Khan (Left) at a meeting with Saudi Crown Prince Mohammed bin Salman during his visit to Pakistan.–File photo

Pakistan has returned $1 billion to Saudi Arabia as a second instalment of a $3 billion soft loan, as Islamabad reaches out to Beijing for a commercial loan to help it offset pressure to repay another $1 billion to Riyadh next month, a foreign newswire quoted Pakistani officials as saying on Wednesday.

Analysts say it is unusual for Riyadh to press for the return of money. But relations have been strained lately between Pakistan and Saudi Arabia, historically close friends.

With the $1 billion flowing out, Pakistan - which has $13.3 billion in central bank foreign reserves - could face a balance of payments issue after clearing the next Saudi instalment.

“China has come to our rescue,” the newswire cited a Foreign Ministry official as saying.

A Finance Ministry was quoted as saying that Pakistan’s central bank was already in talks with Chinese commercial banks. “We’ve sent $1 billion to Saudi Arabia,” he said. Another $1 billion will be repaid to Riyadh next month, he said. Islamabad had returned $1 billion in July.

Although a $1.2 billion surplus in its current account balance and a record $11.77 billion in remittances in the past five months have helped support the Pakistani economy, having to return the Saudi money is still a setback.

Saudi Arabia gave Pakistan a $3 billion loan and a $3.2 billion oil credit facility in late 2018. After Islamabad sought Riyadh’s support over human rights violations by India in Illegally Occupied Jammu and Kashmir, Saudi Arabia has pushed Pakistan to repay the loan.

Pakistani Army Chief General Qamar Javed Bajwa, who visited Riyadh in August to ease the tensions, met the Saudi ambassador in Islamabad on Tuesday.

The newswire said the People’s Bank of China did not respond to a request for comment, and Riyadh didn’t issue any details.

Washington has expressed concerns about Pakistan and other developing countries getting stuck in a “Chinese debt trap”. It has criticised Beijing’s China-Pakistan Economic Corridor plans, involving more than $60 billion in pledged support for infrastructure projects in Pakistan.