KARACHI: Saudi Arabia announced on Thursday that it would roll over a $3 billion loan to Pakistan for another year, making it the first relief for Islamabad after the two countries signed a defence pact in September.
In FY25, $16.3bn was rolled over out of a principal amount of $22bn, while the central bank repaid the remaining amount by buying dollars from the interbank currency market.
“The Saudi Fund for Development (SFD), on behalf of the Kingdom of Saudi Arabia, has extended the term for the deposit of $3bn maturing on Dec 8 for another year. The said amount has been placed with the State Bank of Pakistan (SBP) on behalf Pakistan,” said a statement issued by the central bank.
“The extension of the term of the deposit is a continuation of the support provided by Saudi Arabia to Pakistan, which will help in strengthening the country’s foreign exchange reserves and contribute to the country’s economic growth and development,” the SBP added.
The $3bn deposit was placed with the SBP in 2021 and has been rolled over every year since then.
Pakistan also gets oil from Saudi Arabia on deferred payments to stabilise its paltry foreign exchange reserves.
A $2bn current account surplus in FY25, the first in 14 years, has given enough room to the government for reducing the country’s external financing needs. However, the situation has changed considerably during the new fiscal year as the country posted a current account deficit of $733 million during the first four months of FY26.
Since the trade deficit has been rising every month, it will maintain pressure on the current and external accounts. During the first five months of FY26, the country’s trade deficit rose over 37 per cent to $15.47bn from $11.28bn last year. This means exports are declining while imports are rising.
Rollover by China
The government has been trying to boost foreign exchange reserves of the State Bank and is currently negotiating for another rollover from China and the UAE, but financial experts think it would be difficult to get the concession from Beijing this year.
It is feared that Pakistan’s tilt towards the United States over the past year could make Beijing think twice on Islamabad’s request.
Pakistan is also ready to launch Panda bonds during the current financial year. Pakistan and Saudi Arabia signed a Strategic Mutual Defence Agreement (SMDA) on Sept 17, formalising their long-standing security partnership. Saudi Arabia has also assured Pakistan of making a $10bn investment.
Forex reserves
The central bank’s foreign exchange reserves went up by $14m during the week ended on Nov 28. The SBP’s reserves now stand at $14.574bn.
According to the SBP, the country’s total liquid foreign reserves total $19.588bn, including net foreign reserves of $5.013bn held by commercial banks.
Published in Dawn, December 5th, 2025
