Saudi Arabia has extended the repayment period for a $5 billion loan to Pakistan by another three years.
The extension means Pakistan will not have to repay the loan in the short term, easing pressure on its external financing needs and foreign exchange reserves.
State Bank of Pakistan officials said the Saudi decision would reduce Pakistan’s immediate external payment obligations. They said the country’s overall external financing requirement had fallen to about $21.5bn following the development.
Pakistan currently holds $8bn in deposits from Saudi Arabia, according to the central bank. Riyadh also provided Pakistan with an additional $3bn deposit in April this year, strengthening the country’s foreign exchange position.
Officials said Pakistan’s interest payments on foreign loans had also fallen by about $500m. The country repaid $2.2bn in external debt during July, they added.
Pakistan is also expecting the refinancing of a $1.3bn loan from China next month. If completed, officials say, the refinancing would provide further support to the country’s external financing position and reduce pressure on its foreign exchange reserves.
The State Bank said it had purchased $9bn from the open market during the last financial year as part of efforts to strengthen foreign exchange reserves.
The government has set a target of increasing the country’s foreign exchange reserves to $20.2bn by December 2026.
The latest Saudi decision comes as Pakistan continues efforts to manage its external debt obligations and strengthen its foreign exchange position.
Officials say the extension of the Saudi loan rollover, along with other financial support, will help Pakistan manage its external payments and improve financial stability.
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