Pakistan has returned $1 billion to Saudi Arabia as the second instalment of a $3 billion soft loan, as Islamabad reaches out to Beijing for a commercial loan to help it offset pressure to repay another $1 billion to Riyadh next month, Pakistan media quoting officials reported.
Quoting analysts, a report published by a Pakistan based news organisation Dawn, said that it is unusual for Riyadh to press for the return of money.
Earlier this year, the relation between the two countries Pakistan and Saudi Arabia suffered a strain when the Foreign Minister of Pakistan Shah Mehmood Qureshi, in an unusually sharp warning, asked Saudi Arabia-led Organisation of Islamic Cooperation (OIC) to stop dilly-dallying on the convening of a meeting of its Council of Foreign Ministers (CFM) on Kashmir.
Army Chief Gen Qamar Javed Bajwa subsequently visited Riyadh in August to ease the tensions. Gen Bajwa also met the Saudi ambassador in Islamabad on Tuesday.
With the $1 billion flowing out, Pakistan — which has $13.3 billion in State Bank foreign reserves — could face a balance of payments issue after clearing the next Saudi instalment, the report added.
“China has come to our rescue,” an international news agency Reuters quoted Pakistan’s Foreign Ministry official as saying.
Quoting the Pakistan Finance Ministry official, the report said that SBP was already in talks with Chinese commercial banks.
“We’ve sent $1 billion to Saudi Arabia,” he said. Another $1 billion will be repaid to Riyadh next month, the report quoted the official as having said. Islamabad had returned $1 billion in July.
The report added that although a $1.2 billion surplus in the current account balance and a record $11.77 billion in remittances in the past five months have helped support the economy, having to return the Saudi money is still a setback.
In 2018, Saudi Arabia gave Pakistan a $3 billion loan and a $3.2 billion oil credit facility after Islamabad sought Riyadh’s support over “human rights violations by India in Jammu and Kashmir”. However, Saudi Arabia has now pushed Pakistan to repay the loan.