Months after Saudi Arabia had sought the early repayment of a $3 billion loan, Pakistan is facing the possibility of a similar move by the United Arab Emirates (UAE) at a time when the country is grappling with economic difficulties.
Saudi Arabia had provided Pakistan a $6.2 billion financial support package in 2018 shortly after Imran Khan became the prime minister – a $3 billion loan and a $3.2 billion deferred oil financing facility.
Following a sharp downturn in bilateral ties after Pakistan sought to form an alternative Muslim coalition with Turkey and Malaysia, Saudi Arabia initially withdrew the arrangement for deferred payments for oil purchases and then asked Pakistan last year to repay the loan.
As Pakistan prepares to pay the third and final tranche of $1 billion for the Saudi loan, the country is now facing the possibility that the UAE too could seek the early repayment of a $3 billion financial support package announced in December 2018.
Also read | Biden has already calmed the Middle East
The UAE hasn’t indicated whether it will extend a $1 billion loan – part of the $3 billion package – that will become payable on January 24, The Express Tribune newspaper reported, citing sources in Pakistan’s finance minister. The loan can be extended for a year.
“In case [the UAE] does not withdraw the facility, the loan would be considered extended for one more year,” a senior unnamed official of Pakistan’s finance ministry said.
The ministry didn’t comment on the matter, saying it was a “bilateral confidential matter”. However, the Tribune reported that the Pakistan government is “apprehensive that after Saudi Arabia’s decision to withdraw its bailout package, the UAE might also follow suit”.
The UAE had also announced a $3 billion facility for deferred oil payments for Pakistan but later withdrew the facility.
As its economic woes mount, Pakistan has turned to its “iron brother” ally, China, for financial support. Pakistan has so far taken three loans from China to repay the $3-billion loan from the Saudi, the Tribune reported.
“Beijing gave $1 billion soft loan and two separate financing lines of $1.5 billion and $500 million to pay back the Saudi debt,” the newspaper reported.
Khan had travelled to Saudi Arabia twice soon after becoming the premier to secure the financial support package, which allowed his government to negotiate a bailout with the International Monetary Fund.
Khan’s government has failed in its efforts to get the suspended $6 billion IMF programme restored. It still has to fulfil key conditions set by IMF, such as introducing a mini-budget and hiking electricity tariffs.
According to reports, Pakistan’s central bank’s foreign exchange reserves of $13.4 billion remain fragile, as these largely consist of loans. Short-term loans taken from commercial banks amounted to $4.6 billion as of last November.