Pakistan repays $1 billion to Saudi Arabia after securing Chinese bailout: officials

Pakistan repays $1 billion to Saudi Arabia after securing Chinese bailout: officials
A Pakistani official was quoted as saying that 'China has come to our rescue'.
2 min read
18 December, 2020
Saudi Arabia demanded repayment from Pakistan amid a rift over Kashmir [Getty]
Pakistan has returned $1 billion to Saudi Arabia as the second instalment of a $3 billion soft loan, Pakistani officials said on Wednesday.

The repayment followed Islamabad's securing of a $1.5 billion bailout from Beijing through an expansion of a bilateral Currency-Swap Agreement (CSA).

“China has come to our rescue,” a foreign ministry official told Reuters.

A finance ministry official told the London-based news agency that the State Bank of Pakistan was in talks with Chinese commercial banks.

“We've sent $1 billion to Saudi Arabia,” the official said, adding that another $1 billion will be repaid to the kingdom in January. 

Pakistan, which has $13.3 billion in State Bank foreign reserves, could face a balance of payments issue with the next installment of the loan. Islamabad has so far repaid $2 billion to Riyadh, with the first installment of $1 billion having been transferred in July.

Saudi Arabia extended a $3 billion loan and a $3.2 billion oil credit facility to Pakistan in 2018.

However, the Gulf nation swiftly demanded repayment after a rift emerged between the two states over Kashmir.

Pakistan's lobbying and criticism of the Saudi-led Organization of Islamic Cooperation (OIC) over its stance on the Kashmir crisis irked Saudi Arabia, which does not usually press its debtors for repayment.

Saudi Arabia has in recent times scaled back its famed chequebook diplomacy, a longstanding policy of splashing petro-dollars in exchange for influence, which observers say has yielded few tangible gains.

For decades, the wealthy kingdom funnelled billions in aid to its allies - and to its enemies' enemies - in a bid to bolster its position as an Arab powerhouse and leader of the Muslim world.

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