Saudi Arabia Rolls Over Pakistan's $3bn Loan as US $10bn Facility Fades

Photo: The Express Tribune (screengrab)

Pakistan has breathing room on a $3 billion Saudi loan. Riyadh has rolled it over for a reasonable period, Finance Minister Muhammad Aurangzeb confirmed on Wednesday, and he said Pakistan does not need extra Saudi help right now. At the same time, the $10 billion US facility Pakistan asked for in July looks less likely than before.

Speaking to journalists at Parliament House, Aurangzeb said the loan had been extended, but he would not say for how long. "It has been extended and for a reasonable period. You don't need to worry as to for how long given the kind of strategic relationship we have," he said, as Dawn reported.

The money was given in April this year to bridge a gap left by $3.5 billion in repayments to the United Arab Emirates. It matured on 31 October after a three month term. Aurangzeb said he had a very good meeting with his Saudi counterpart, Mohammed Al-Jadaan, during the recent World Bank and IMF meetings in Bangkok.

Saudi Arabia has already extended a separate $5 billion facility until 2028. Together, the two facilities add up to $8 billion in Saudi support sitting behind Pakistan's reserves.

For ordinary Pakistanis, the rollover matters because it stops a large repayment falling due at once. Aurangzeb said foreign exchange reserves have crossed $21.5 billion, which he called the best ever level in Pakistan's history, and cover more than three months of imports. The plan, he said, is to build that cover to four months by the end of the year through capital markets.

The other half of the story is the US facility. Pakistan asked Washington in July for a $10 billion Exchange Stabilisation Support Facility and had hoped for approval before the end of September. Aurangzeb now played down that hope. He said what Pakistan really wanted in July was market access, and it got that in September when it raised $3 billion through a bond against orders worth $6 billion.

"If that (facility) materialises, fantastic, it will be a liquidity support facility. Otherwise, we have plans for further Eurobond issuance, Panda bond issuance and rupee-linked dollar-settled bond," he said, as The Express Tribune reported. He added that he had met 70 to 80 institutional investors in Bangkok and that offers were available for five year and 10 year maturities.

The wider debt picture shows why the government is keen to stretch out repayments. Aurangzeb told the Senate Standing Committee on Finance that external debt had risen from $45 billion in 2014-15 to around $100 billion, but by only about $1 billion a year over the past two years. Public debt fell to 68.6 percent of GDP by the end of June 2026, from 75.1 percent in 2022-23, Finance Secretary Imdadullah Bosal told the committee.

Pakistan is targeting a $4 billion cut in external debt this fiscal year and $3.5 billion next year, against $4.5 billion last year. Net financing needs after rollovers and refinancing stand at $11 billion, of which $5 billion was already repaid in the first four months of this fiscal year. The IMF Executive Board is expected to meet in December to approve a $1.2 billion disbursement, Aurangzeb said.

PakInsight Hub has followed Pakistan's economy closely this week, including petrol falling to Rs362 a litre in Pakistan from today, Pakistan weighing arbitration to recover $800m from Etisalat over the PTCL sale and subsidised gas at Rs300 to Rs350 for BISP families under the new LPG policy.

Sources

• Dawn: Riyadh rolls over $3bn as prospects of $10bn US facility wane
• The Express Tribune: Saudi Arabia extends $3 billion loan rollover
• Business Recorder: Aurangzeb informs Senate body, external accounts comfortable

What happens next: The next test is the IMF board meeting in December, and whether the US facility materialises at all.

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