Pakistan seeks 10-year extension on $5 billion Saudi deposits amid West Asia crisis

Islamabad: Pakistan has submitted a comprehensive suite of requests to Saudi Arabia for long-term economic assistance, seeking to stabilise its finances as the regional conflict involving the U.S., Israel, and Iran exacerbates its domestic crisis.

According to a report by The News on Monday, Islamabad is seeking to convert $5 billion in existing short-term deposits held at the State Bank of Pakistan into a 10-year long-term facility with favourable interest rates.

The formal appeal arrives as Pakistan’s economic challenges multiply due to escalating geopolitical tensions in West Asia. Concurrently, the government is engaged in negotiations with the International Monetary Fund (IMF) to finalise the third review of its $7 billion Extended Fund Facility (EFF).

Eight Pillars of Economic Relief

The proposal to Riyadh includes several high-stakes financial manoeuvres designed to bolster foreign exchange reserves and reduce the cost of international borrowing:

• Oil Credit Expansion: Pakistan has requested that its deferred payment facility for oil be increased from $1.2 billion to $5 billion. Additionally, it seeks to extend the repayment period for each tranche from one year to three years.
• Remittance Securitisation: A request was made to securitise $10 billion in remittances from the Pakistani diaspora to strengthen the nation's financial standing and decrease reliance on expensive foreign loans.
• Sukuk Guarantees: Islamabad is asking Saudi Arabia to provide guarantees for new international Sukuk (Islamic bond) issuances, which would allow Pakistan to access global capital markets at lower interest rates.
• Export Support: The government has requested a concessional credit line for the newly established EXIM Bank of Pakistan to drive export-led growth.
• Trade Facilitation: Pakistan has asked the Kingdom to consider waiving bank guarantee requirements for import-related transactions.
• Direct Investment: A request was made for the Saudi Public Investment Fund (PIF) to explore new investment opportunities within Pakistan.
• Fiscal Flexibility: Islamabad is seeking assistance in adjusting its primary surplus targets under the IMF program to accommodate proposed tax rationalisation, noting that rigid expenditures make further spending cuts difficult.

Uncertain Response

While the recent regional escalation has reportedly given "impetus" to ongoing economic parleys between the two nations, the Saudi government has yet to officially respond to the eight specific requests.

Representatives from Pakistan’s Ministry of Finance and the State Bank of Pakistan did not immediately provide comments regarding the status of the negotiations.

With inputs from PTI