(April 21): Pakistan has received the final US$1 billion tranche of a US$3 billion support package from Saudi Arabia, shoring up the South Asian nation’s foreign exchange reserves after the UAE declined to rollover its debt.
The funds were transferred by the Kingdom’s finance ministry on April 20, after the first tranche of US$2 billion was received by the nation’s central bank last week, State Bank of Pakistan announced in a statement on Tuesday.
The move showcases a growing camaraderie between Islamabad and Riyadh since the war in Iran sent shock waves across the region. Pakistan recently deployed troops and fighter jets in Saudi Arabia under a new defence pact. With the war in Iran causing energy shortages and fuelling inflation, Pakistan’s foreign exchange reserves have dropped to US$15.1 billion, which are barely enough to cover three months of imports.
It’s unclear what prompted the UAE to demand repayment of about US$3 billion loan, a move that caught Pakistan by surprise. The country’s foreign ministry downplayed growing speculation of a possible political fallout between the two countries, saying such asks were part of a “routine financial transaction.” Local media reports have pointed to a breakdown in negotiations over the terms of a rollover.
Saudi Arabia has also extended the term of an existing US$5 billion deposit, which will no longer be subject to annual rollover, Pakistan’s finance ministry said earlier this month, citing its minister Muhammad Aurangzeb.
UAE’s demand for repayment of its loan came after Islamabad failed to strike an agreement with the Gulf country to rollover the debt for the first time in seven years. Pakistan has already paid US$2 billion to the UAE. According to local media reports, it will pay US$1 billion this week — a move not confirmed by a central bank official.
See also: Three ships including Iranian vessel cross Hormuz Strait
Pakistan is in a US$7 billion bailout package by the International Monetary Fund and the lender reached an initial staff-level agreement with Islamabad last month for the disbursement of a US$1.2 billion instalment.
Uploaded by Evelyn Chan
