Saudi Arabia rolls over $5b debt

Pakistan's external sector pressure has subsided after Saudi Arabia rolled over a $5 billion debt for three years, coupled with $9 billion in foreign currency purchases from the local market in the last fiscal year, State Bank of Pakistan (SBP) Governor Jameel Ahmad said on Wednesday. The three- to five-year rollovers of short-term debts, which Pakistan had taken years ago for one year, are part of the government's new strategy to delay repayments and gain breathing space before kick-starting the economy. Due to the rollover of $5 billion cash deposits by Saudi Arabia till December 2028 Pakistan's gross external financing requirements have come down to $21.5 billion for this fiscal year, the governor told The Express Tribune in Parliament House.

Pakistan has taken a total of $8 billion in cash deposits from Saudi Arabia, including $3 billion obtained in April this year. Out of this, the $5 billion deposits were rolled over every year before the Kingdom granted a three-year extension. In April, Finance Minister Muhammad Aurangzeb said the Kingdom had extended a $5 billion deposit for a longer period but did not share further details about its next maturity.

In addition, Saudi Arabia had given $3 billion for three months, which matured this month but were further rolled over. The governor did not comment on whether the remaining $3 billion had been rolled over for three months or for a longer period. Ahmad said interest costs on foreign debts had also reduced by nearly half a billion dollars, contributing to lowering overall gross financing requirements.

The gross external financing requirements are the sums needed to meet external obligations. Pakistan has remained heavily dependent on foreign creditors for meeting its external financing needs for debt repayments and funding the current account deficit. Exports and foreign direct investment could not improve despite multi-front efforts, and in a latest push, the federal government approved Rs98 billion in subsidies for exporters for this fiscal year alone.

For the next fiscal year, the International Monetary Fund (IMF) has projected $30 billion in external financing requirements. The governor said these projections were on the higher side, as the government was making efforts that would bring down requirements even below this year's level of $21.5 billion. The government has reportedly reached out to Saudi A…