Pakistan has returned $1 billion to Saudi Arabia as the second instalment of a $3 billion soft loan, as Islamabad reaches out to Beijing for a commercial loan to help it offset pressure to repay another $1 billion to Riyadh next month, officials said on Wednesday.
Analysts say it is unusual for Riyadh to press for the return of money. Relations between historically close friends Pakistan and Saudi Arabia suffered a strain earlier this year when Foreign Minister Shah Mehmood Qureshi, in an unusually sharp warning, asked Saudi Arabia-led Organisation of Islamic Cooperation (OIC) to stop dilly-dallying on the convening of a meeting of its Council of Foreign Ministers (CFM) on Kashmir.
Army Chief Gen Qamar Javed Bajwa subsequently visited Riyadh in August to ease the tensions. Gen Bajwa also met the Saudi ambassador in Islamabad on Tuesday.
With the $1 billion flowing out, Pakistan — which has $13.3 billion in State Bank foreign reserves — could face a balance of payments issue after clearing the next Saudi instalment.
“China has come to our rescue,” a foreign ministry official told Reuters.
A finance ministry official said the SBP was already in talks with Chinese commercial banks.
“We've sent $1 billion to Saudi Arabia,” he said. Another $1 billion will be repaid to Riyadh next month, he said. Islamabad had returned $1 billion in July.
Although a $1.2 billion surplus in the current account balance and a record $11.77 billion in remittances in the past five months have helped support the economy, having to return the Saudi money is still a setback.
Saudi Arabia gave Pakistan a $3 billion loan and a $3.2 billion oil credit facility in late 2018. After Islamabad sought Riyadh's support over human rights violations by India in occupied Kashmir, Saudi Arabia has pushed Pakistan to repay the loan.
The People's Bank of China did not respond to a Reuters request for comment, and Riyadh didn't issue any details.