Pakistan debt: Not US or China, this country is giving cheapest loan to Pakistan, its name is…

Pakistan is receiving a loan from this Muslim country at a very low interest rate. The country is neither China nor the United States.

Pakistan Debt: Cash-strapped Pakistan is deeply dependent on help from other countries or organisations, sometimes the United States, China or the International Monetary Fund. There is another Muslim country that provides Islamabad with loans at a very low interest rate. And if the neighbouring country fails to pay the loan on time, this country extends the deadline without any additional fees. Saudi Arabia has been a very good and close ally of Pakistan for years and is also a major provider of cheap loans to the cash-strapped country. As per a recent report, Saudi Arabia provides loans to Pakistan at a minimal interest of 4 percent. The country charged only 4 percent interest on the two cash loans it provided to Pakistan. According to Express Tribune, the loan Saudi Arabia provided to Islamabad was for one year, but when the cash-strapped country failed to repay the loan, it extended the deadline every year without additional fees.

Does Saudi Arabia Provide Loans to Pakistan Cheaper Than Those From China?

As per the report, the loan that Saudi Arabia provided to Pak is one-third cheaper than the cash deposit from China. not only that the Saudi loan is also half the cost of a foreign commercial loan.

The report states that Saudi Arabia has given USD2 billion loan to Pak, which will expire in December. However, The Saudi Finance Ministry is planning to extend it again.

Notably, another financial assistance of USD3 billion from Saudi, taken by Islamabad under an IMF program, will expire in June next year. Pakistan took this loan to cover its external financing shortfalls.

HIGHLIGHTS

• Saudi Arabia provides loans to Pakistan at 4% interest, cheaper than loans from China and foreign lenders.
• When Pakistan fails to repay on time, Saudi Arabia extends loan deadlines every year.
• Saudi Arabia has given USD 2 billion expiring in December and USD 3 billion under an IMF program expiring next June.
• Despite IMF support, Pakistan’s central bank had to buy over USD 8 billion from local markets to repay debts.

What Did The IMF Say?

The IMF has said that Pak’s three major lenders (Saudi Arabia, China, and the UAE) must maintain the cash deposits until the three-year program is completed. The report stated that these countries have contributed USD12 billion in the deposits.

What Has Happened To IMF Programs?

According to the report, IMF programs for Pak are no longer as effective as they once were. Despite IMF support, the central bank had to buy over USD8 billion from local markets to repay debt. Now, the Finance Ministry is more dependent on credit guarantees from multilateral banks to take loans from international markets. The step taken as an economic clean bill of health from global lenders is no longer sufficient on its own.