ISLAMABAD: Pakistan has requested Saudi Arabia to increase its lending by approximately $1.5 billion, raising its total exposure from $5 billion to $6.5 billion, to help address the external financing gap required for the IMF’s 37-month bailout package pending executive board approval.
According to informed sources, all three key bilateral partners—Saudi Arabia, China, and the UAE—must confirm their $12 billion loan rollovers to Pakistan through their executive directors at the IMF.
In response, the Pakistani government has established a finance minister-led committee, including Power Minister Awais Leghari and Minister of State Ali Pervez Malik, to advance negotiations with Chinese authorities and energy sector investors, aided by a Chinese financial advisory firm.
The government recently confirmed the initiation of a reprofiling process for over $27 billion in debt and liabilities with these three friendly nations. This reprofiling or rollover of $12 billion is a condition set by the IMF under the $7 billion Extended Fund Facility.
Additionally, Pakistan has requested Beijing to reprofile over $15 billion in energy sector liabilities and shift from imported to local coal to ease fiscal pressures, manage foreign exchange outflows, and adjust consumer tariffs.
Currently, Saudi Arabia’s exposure to Pakistan stands at $5 billion, with China at $4 billion and the UAE at $3 billion. Pakistan’s request for an additional $1.5 billion from Saudi Arabia may be fulfilled through a bilateral commercial loan or a SAFE deposit.
Saudi Finance Minister Mohammed Al-Jadaan has assured additional support, but the confirmation process is reportedly delayed. Finance Minister Muhammad Aurangzeb had anticipated prompt rollover confirmations based on assurances from Chinese, Saudi, and UAE finance ministers. These confirmations were expected to lead to IMF board approval by late August but have been tentatively rescheduled to September.
Following his visit to China on July 28, Aurangzeb reported positive assurances from his counterparts, claiming a strong position on external financing for the coming years. However, this support has yet to materialize fully. The finance minister and his team are now reaching out to UAE commercial banks and seeking further assistance from Saudi Arabia, despite some offers from Western banks with unfavorable interest rates.
Discussions have been held with executives from Mashreq Bank and Dubai Islamic Bank, and recent talks with the Saudi finance minister are also reported. An official indicated that Pakistan must improve its credit rating and secure Saudi support before finalizing commercial lending agreements with foreign banks.
The finance ministry initially expected the trio of lenders to quickly roll over $12 billion in debt by three to five years to secure IMF approval by August. The new target for IMF approval is September.
For the current fiscal year, Pakistan aims to secure $20 billion in foreign borrowing, with an additional $3 billion rollover from the UAE. This borrowing is projected to increase reserves to approximately $19 to $20 billion by the end of the fiscal year, including $4 billion from foreign commercial borrowing and $1 billion from international bonds.
