Pakistan has been grappling with economic woes and the situation is not likely to change anytime soon. As per reports, following the footsteps of Saudi Arabia, the United Arab Emirates (UAE) might seek repayment of its $3 million debt from the Pakistani government.
As per a report in Hindustan Times, the UAE had announced a $3 billion package for Pakistan in December 2018. But, the Arab country has not indicated its plans to extend the $1 billion dollars, payable on January 24 this year as part of the original $3 billion package. As such, Pakistan is ‘apprehensive’ that the UAE might demand loan repayment as well, amidst souring bilateral relationships.
While the Pakistani Finance Ministry did not comment on the development by dubbing it as ‘confidential’, a source in the Ministry cited by The Tribune, “In case (the UAE) does not withdraw the facility, the loan would be considered extended for one more year.” It must be mentioned that UAE had also announced $3 billion worth of deferred oil payments from Pakistan but soon cancelled the facility.
Saudi Arabia had asked Pakistan last year to repay its debt of $3 billion, which the Arab country provided as a financial support package to the latter in 2018. Besides the package, Saudi Arabia had also announced a credit facility of $3.2 billion for deferred oil payments. Pakistan, which had attempted to form an alliance with Malaysia and Turkey as ‘alternative Islamic powers’, had drawn the ire of Saudi Arabia.
Pakistan borrows from China to repay Saudi Arabia debt
According to the Pakistani Ministry of Finance and the State Bank of Pakistan (SBP), Pakistan had taken a loan from China to repay a $3 billion loan taken from Saudi Arabia. A desperate Pakistan did so because had it defaulted the payment, Saudi Arabia would have reduced its financial support.
According to the agreement between Saudi Arabia and Pakistan, the assistance provided by Saudi Arabia was for one year. It had an option to roll over the amount at the end of the year for a period of three years. Pakistan was paying 3.2 per cent interest on the $3 billion loan. Pakistan had received the first tranche of $1 billion in November 2018, second $1 billion in December 2018 and third tranche of $1 billion in January 2019.
To repay the loan from Saudi Arabia, Pakistan had borrowed from China in three instalments of USD 1 billion, 1.5 billion and 500 million respectively.