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

Pakistan has secured a $3bn rollover from Saudi Arabia, as hopes for a proposed $10bn US facility appear to have diminished, it was announced on Wednesday. Finance Minister Muhammad Aurangzeb confirmed the extension of the Saudi financing, which was initially provided in April to cover a gap arising from $3.5bn in repayments to the United Arab Emirates.

The minister stated that the $3bn financing would be extended for a reasonable period, given the strong strategic relationship between the two countries. He highlighted that foreign exchange reserves had covered over three months of imports and would be strengthened to provide a four-month import cover by year-end through capital markets.

Regarding the US Exchange Stabilisation Support Facility (ESSF), Aurangzeb emphasized that market access had already been secured through the $3bn bond Pakistan issued in September. He expressed optimism about potential further Eurobond, Panda bond, and rupee-linked dollar-settled issuances, stating that the government was exploring options beyond the IMF programme.

The minister also emphasized that the US, through its Export-Import Bank and Development Finance Corporation (DFC), needed to support Pakistani investors and exporters. He noted that the ESSF request was for a liquidity support facility, which, if granted, would be beneficial but not indispensable. Pakistan has set a target to reduce external debt by $4bn this fiscal year and $3.5bn in the following year, compared to $4.5bn in the previous fiscal year.

The finance minister reported that the IMF Executive Board meeting to approve a $1.2bn disbursement to Pakistan would be held in December.