UAE, Saudi Arabia Expected To Agree To Roll Over Outstanding Loans Worth $ 2 Billion Each

ISLAMABAD: Pakistan has started its intense lobbying to guarantee the rollover of loan deposits worth $ 4 billion from the Kingdom of Saudi Arabia (KSA) and the United Arab Emirates (UAE) due between November and February of the current fiscal year, The news reported Thursday.

According to the report, the PTI government has no choice but to request a one-year renewal to avoid the depletion of foreign exchange reserves under the IMF program, as it could not afford to repay outstanding loans as they fall due at this stage.

A senior finance ministry official said the two countries were ready to roll over outstanding loans.

The first deposit of $ 1 billion under the loan guaranteed by Saudi Arabia took place in November 2019, followed by another tranche in December 2019 and the third tranche of $ 1 billion in January 2020.

Earlier this year, Pakistan returned $ 1 billion while $ 2 billion is still held by the State Bank of Pakistan.

On the other hand, the UAE provided a loan deposit of $ 2 billion in January and February 2020. These loans would mature at the start of the following calendar year.

Earlier on Saturday, Pakistan decided to seek the renewal of a $ 3 billion Chinese trade finance facility that the country cannot afford to repay when the facility expires in May next year.

According to a report by Express stand, the State Bank of Pakistan (SBP) had fully utilized the $ 3 billion (Chinese yuan 20 billion) additional trade finance facility available under the China-Pakistan currency swap agreement , as indicated in the financial accounts of the SBP for the financial year 2019-2020 (FY20).

It is relevant to mention here that most of the funds, initially intended to promote bilateral trade in the respective local currencies, were used to repay maturing foreign debt and keep gross foreign exchange reserves at comfortable levels.

The Bilateral Currency Exchange Agreement (CSA) was entered into by the SBP and the People’s Bank of China (PBOC) in December 2011 “to promote bilateral trade, finance direct investment and provide short-term liquidity support. “, According to the central bank.

“The state bank bought and used 475 billion rupees during the year with installments ranging from three months to one year,” says the SBP’s financial report.

“We plan to extend the CSA (currency exchange agreement) for another three years in 2021,” an SBP spokesperson said, adding that the $ 3 billion money was part of the $ 12.1 billion. dollars of foreign exchange reserves currently held by the central bank.

Failure to secure an extension of the loan’s expiration date will result in the SBP being required to repay $ 3 billion to China using dollars to buy Chinese yuan, a move that will certainly have an impact on China’s reserves. changes country.

In addition, the government is still fighting for the reinstatement of the IMF’s $ 6 billion program which remains suspended as the international monetary organization continues to insist on a mini-budget and an increase in electricity tariffs in Pakistan then. that the country faces consistently high inflation.

The delay in restoring the IMF program can damage program loans that were essential to repay the $ 10.6 billion in loans falling due in the current fiscal year.

Pakistan’s foreign exchange reserves held by the SBP stood at $ 12.121 billion until October 23, 2020, and a large portion of the reserves consists of outstanding loans.

Pakistan and the IMF had reached $ 6 billion under the Extended Financing Facility (EFF) and this program had accepted external financing for the renewal of loans from Saudi Arabia, the United Arab Emirates and China for a period of three years. Thus, any deviation from this arrangement could aggravate the difficulties on both sides of settling because of the external front.

The IMF had forecast a gross external financing requirement of $ 29 billion for the current fiscal year, but independent economists disagreed with this figure, arguing that the IMF still overestimates the figures for the current fiscal year. use as a tactic to convince the country to stay in the fold of the IMF program.