Islamabad – Pakistan has secured commitments from China, Saudi Arabia, and the United Arab Emirates (UAE) to roll over debt for a year, providing a significant boost to the government as it awaits final approval of a new $7 billion loan program with the International Monetary Fund (IMF), Bloomberg reported on Tuesday.
These commitments come under a unique financial arrangement Pakistan has with the three countries, comprising commercial loans and SAFE deposits rolled over annually. These rollovers are a critical component of Pakistan’s external financing needs under the IMF program.
Finance Minister Muhammad Aurangzeb announced that Pakistan has requested to extend the maturity period of these loans—$5 billion from China, $4 billion from Saudi Arabia, and $3 billion from the UAE—to at least three years. This extension aims to provide greater predictability under the IMF program.
Aurangzeb, speaking to reporters after a parliamentary committee meeting in Islamabad, stated that the volume of rollovers would remain consistent with the previous year. He added that Pakistan has $12 billion in bilateral loans that have been extended for the past few years.
In July, Pakistan reached an agreement with the IMF for a 37-month loan program. Over the years, the country has heavily relied on IMF programs, occasionally approaching the brink of sovereign default and seeking financial assistance from countries like the UAE and Saudi Arabia to meet the external financing targets set by the IMF.
Bloomberg reported that Aurangzeb mentioned the government expects to manage a financing gap of up to $5 billion during the fund’s three-year program. The IMF’s statement following the staff-level agreement noted that the new Extended Fund Facility program is subject to approval from its executive board and requires timely confirmation of necessary financing assurances from Pakistan’s development and bilateral partners.
The finance ministry has yet to respond to Reuters’ request for comment.
Last week, Prime Minister Shehbaz Sharif revealed that he had written to the Chinese government requesting debt reprofiling for Pakistan.
This development marks a crucial step for Pakistan in securing financial stability and meeting its obligations under the IMF program.
