Finance Minister Shaukat Tarin informed the Senate on Friday that Pakistan has to return $3 billion — that was placed in the State Bank of Pakistan's (SBP) account following an agreement with the Saudi Fund for Development (SFD) in 2021 — within a year.
Saudi Arabia had in October last year agreed to revive its financial support to Pakistan, including about $3 billion in safe deposits and $1.2bn to $1.5bn worth of oil supplies on deferred payments.
The facility was expected to help Pakistan convince the International Monetary Fund (IMF) about its financing plan.
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Sharing the details of the deal during the Senate session today, Tarin said that the interest rate on the loan was four per cent which would have to be paid every three months. "Interest rates are rising across the world. The interest rate for the Saudi loan being four per cent is not something bad," he said.
The loan amount would have to be returned in one go, he added.
The loan has been provided in accordance with Saudi laws, the finance minister further said.
He explained that if there was a clause in the agreement to extend the loan repayment, "then it would have been written [in the accord] that an extension can be allowed for a year". However, "we asked for a loan from Saudi Arabia only for a one-year period," he added.
"The Saudi government has told us that they can ask for their [entire] money back if Pakistan defaults at any point," Tarin said. He assured the house that Pakistan "will not default".
Crude oil
Tarin also informed the Senate that Pakistan would start getting crude oil from Saudi Arabia on deferred payments from March, according to a report by Radio Pakistan.
Saudi Arabia had also provided $3bn in cash deposits and promised a $3bn oil facility to Pakistan to help the latter shore up its foreign exchange reserves in 2018. However, as bilateral relations deteriorated later, Islamabad had to return $2bn of the $3bn deposits.
Talking about petroleum prices, the finance minister said the government had tried not to pass the "full burden" of the increase in international petrol rates, pointing out that sales tax and petroleum levy had been reduced to "provide relief for the masses".
He added that the SBP's reserves had risen over the last year which would help decrease pressure on the rupee.
Responding to another question, he said Pakistan had fulfilled 27 out of 28 conditions set by the Financial Action Task Force (FATF). "We have fulfilled our targets and hope the country will come out of the grey list in the next review meeting of the FATF," he was quoted as saying in the report.