Saudi key source of cheap loans for Pak: Report

Saudi Arabia remains the major source of cheap foreign loans for Pakistan, charging an annual interest rate of only 4 per cent, a media report said on Sunday.

Riyadh charged a 4 per cent interest rate on two separate cash deposit facilities obtained by Islamabad in recent years, according to official records. The loan, originally contracted for one year, has yet to be repaid, The Express Tribune reported.

The kingdom has been rolling it over annually without imposing additional costs.

Saudi loans were about one-third cheaper than Chinese cash deposits and less than half the cost of foreign commercial borrowing, the report added.

A $2 billion Saudi cash deposit facility is set to mature in December, and the Ministry of Finance plans to roll it over again, according to the report, which quoted sources as saying.

Another $3 billion Saudi loan, obtained to plug the external financing gap under the IMF programme, will mature in June next year.

The IMF has stipulated that Pakistan’s three bilateral creditors, Saudi Arabia, China and the United Arab Emirates, must maintain their cash deposits until the completion of the three-year programme.

Together, these countries have provided $12 billion in deposits, forming the bulk of the central bank’s $14.3 billion gross foreign exchange reserves, the report said.