Saudi conditions

Published November 30, 2021

DECADES of fiscal profligacy have trapped the country in a situation where it not only has to borrow more money to return old loans, but must also pay for new import bills. The increasing dependence on foreign loans means that the country is surrendering a bit of its sovereignty every time it approaches lenders for more money.

When the federal cabinet on Friday approved the unpleasant conditions of a new Saudi loan amounting to $4.2bn, it had no other choice because of the growing external-sector vulnerabilities. That the Saudis are charging a slightly higher price than before for their ‘assistance’ shouldn’t bother us too much.

After all, they are extending us this favour at a time when our official foreign exchange reserves have gone down from $20.07bn to $16.25bn in the last three months, the rupee has lost 15pc of its value and the current account deficit has crossed $5bn to reach 4.7pc of GDP.

But the other conditions under which Riyadh can demand that Islamabad return the loan on 72 hours’ notice with or without assigning any reason are worrisome. Moreover, in case of a dispute, Saudi law will be applicable.

These conditions mean that the kingdom can ask us to return the money at any time if the two countries have divergent views regarding their relationship or ties with a third country, or some other issue. We saw the risk to a $6.2bn deal given in 2018 when Saudi Arabia pressed for the premature return of a part of it after the foreign minister’s outburst in 2020 against the OIC for its silence on Indian atrocities in held Kashmir.

Earlier, the prime minister was also forced to withdraw from a three-nation summit in Malaysia under pressure from Riyadh. The new Saudi ‘facility’ comes on the heels of an IMF announcement about the agreement with Islamabad on the resumption of its $6bn loan.

The deal is dependent on the implementation of tough ‘prior actions’ Islamabad had earlier refused to execute for fear of a political backlash. This indicates Pakistan’s waning ability to muster more debt without significantly compromising on its sovereignty.

It also underscores the fact that we are not yet ready to change ourselves. Pakistan’s excessive external indebtedness has deep structural roots; we will not come out of the debt trap unless we decide to revamp the economy, mobilise tax and non-tax revenues to match our expenditure needs, and boost our industrial exports.

Published in Dawn, November 30th, 2021

Opinion

Editorial

Afghan puzzle
Updated 28 May, 2024

Afghan puzzle

Unless these elements are neutralised, it will not be possible to have the upper hand over terrorist groups.
Attacking minorities
28 May, 2024

Attacking minorities

WHILE Pakistan has watched many perish in the cauldron of sacrilege, the state has done little to turn down the...
Persistent scourge
28 May, 2024

Persistent scourge

THE challenge of polio in Pakistan has reached a new nadir, drawing grave concerns from the Technical Advisory Group...
Mercury rising
Updated 27 May, 2024

Mercury rising

Each of the country's leaders is equally responsible for the deep pit Pakistan seems to have fallen into.
Antibiotic overuse
27 May, 2024

Antibiotic overuse

ANTIMICROBIAL resistance is an escalating crisis claiming some 700,000 lives annually in Pakistan. It is the third...
World Cup team
27 May, 2024

World Cup team

PAKISTAN waited until the very end to name their T20 World Cup squad. Even then, there was last-minute drama. Four...