Loan Deposit Extension from Saudi Arabia

Saudi Arabia confirmed a one-year extension of the USD 3 billion deposit.

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Macro Bite # 116

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State Bank of Pakistan on Sunday informed via a Tweet that the Saudi Fund for Development (SFD) has confirmed an extension for one year of a USD 3 billion deposit currently placed in the bank's accounts since 2021.

The USD 3 billion cash facility had been secured at an interest rate of 4%. The rate was by one-fourth times higher than the previous similar facility that Pakistan had obtained at a 3.2% interest rate.

However, the agreement between the two countries also states that Saudi Arabia could demand an immediate return of the money in case of a sovereign default by Pakistan. Pakistan will be bound to return USD 3 billion to Saudi Arabia within 72 hours of a written request by Saudi Arabia at any time during the term of the agreement.

Any one of the following will be considered as 'default':

• A delay in timely interest payment

• Pakistan's non-compliance with any provision of the cash deposit agreement

• An end to the IMF membership will also be treated as a default

GRAPHIC OF THE DAY

In the past year, Saudi Arabia has provided Pakistan with USD 4.2 billion of support in the form of a USD 3 billion loan deposited with the central bank as well as USD 1.2 billion in deferred oil payments to boost its foreign exchange reserves

Source: SBP

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