ISLAMABAD: Pakistan has reportedly asked Saudi Arabia to increase its lending by approximately $1.5 billion, raising its current $5 billion portfolio to help address the external financing gap required for the IMF’s 37-month bailout package, which is awaiting executive board approval.
As part of the process, all three major bilateral partners—Saudi Arabia, China, and the UAE—must confirm their $12 billion loan rollovers to Pakistan through their respective IMF executive directors.
Additionally, the government has established a finance minister-led committee, which includes Power Minister Awais Leghari and Minister of State Ali Pervez Malik, to advance negotiations with Chinese authorities and energy sector investors. This process is being supported by a Chinese financial advisory firm.
Last month, the government officially announced that it had initiated the reprofiling of over $27 billion in debt and liabilities with these three countries. This reprofiling, or rollover, of $12 billion is a key requirement for the IMF under the $7 billion Extended Fund Facility.
Pakistan has also requested China to reprofile more than $15 billion in energy sector liabilities and convert coal-based projects from imported to local coal to manage repayment difficulties and reduce energy sector foreign exchange outflows and consumer tariffs.
Currently, Saudi Arabia holds $5 billion in exposure to Pakistan, followed by China with $4 billion and the UAE with $3 billion. Pakistan’s request for an additional $1.5 billion from Saudi Arabia is expected to be in the form of a bilateral commercial loan or potentially a SAFE deposit.
Saudi Finance Minister Mohammed Al-Jadaan has assured additional support, but the confirmation process has been slow. Finance Minister Muhammad Aurangzeb had anticipated quick rollover confirmations based on discussions with Chinese, Saudi, and UAE finance ministers, but now expects IMF board approval to be delayed until September.
Upon returning from China on July 28, Finance Minister Aurangzeb expressed confidence that Pakistan was in a strong position regarding external financing for the coming years. However, securing immediate financing for the first year has proven challenging.
To address this, Aurangzeb and his team are reaching out to several commercial banks in the UAE and seeking further support from Saudi Arabia, despite offers from Western banks with high interest rates due to the current political and macroeconomic conditions.
The finance minister has been in discussions with Mashreq Bank and Dubai Islamic Bank, and has also engaged with the Saudi finance minister. Pakistan must ensure a favorable environment and improved credit rating before finalizing agreements with foreign banks for commercial loans. These banks have expressed willingness to provide $300-350 million each for the current fiscal year, potentially complemented by sukuk bonds in the next fiscal year.
The finance ministry initially expected the trio of bilateral lenders to swiftly rollover $12 billion in debt to secure IMF board approval for its $7 billion bailout by the end of August. This deadline is now expected to shift to September.
For the current fiscal year, Pakistan aims to secure around $20 billion in foreign borrowing, with an additional $3 billion rollover from the UAE. This borrowing is projected to increase Pakistan’s reserves to approximately $19 to $20 billion by the fiscal year’s end. Of the $20 billion, $4 billion is targeted through foreign commercial borrowing and $1 billion through international bonds.
