Pakistan secures $3bn rollover from Saudi Arabia as prospects of $10bn US facility wane

Pakistan successfully secured a $3 billion rollover loan from Saudi Arabia, as hopes for a $10 billion US facility diminished, according to Finance Minister Muhammad Aurangzeb. The minister confirmed Riyadh's extension of the original $3 billion financing provided in April, which bridged a gap from $3.5 billion in repayments to the United Arab Emirates.

The extended loan, valid for a reasonable period, was discussed during recent World Bank-IMF meetings in Bangkok. Aurangzeb denied seeking additional support, stating foreign exchange reserves covered more than three months of imports, with plans to strengthen reserves to provide a four-month import cover by year-end through capital markets.

He also emphasized that the $10 billion US facility, initially requested in July, now focuses on market access rather than liquidity support, as the $3 billion bond issued in September addressed this need. The finance minister reported meetings with 70-80 institutional investors, who expressed confidence in Pakistan's prospects, anticipating further Eurobond, Panda bond, and rupee-linked dollar-settled issuances.

The government aims to reduce external debt by $4 billion this fiscal year and $3.5 billion the following year, replacing expensive short-term borrowing with longer-term financing through bonds and private placements. External debt has risen annually by $5-6 billion, but has increased by only $1 billion over the past two years. The IMF Executive Board meeting to approve a $1.2 billion disbursement to Pakistan is scheduled for December.