ISLAMABAD: Saudi Arabia’s decision to refuse to provide any further bailouts or interest-free loans to Pakistan has left the government in Islamabad in shock and has prompted the finance minister to complain that even friendly countries aren’t keen on helping Pakistan out of its economic emergency.
According to media reports, Pakistan is in dire need of sustained US dollar inflows to avoid defaulting on nearly $80bn of international loan repayments over the next three and a half years. The country is currently sitting on just $3bn in foreign exchange reserves. Pakistan is also locked in difficult negotiations with the International Monetary Fund (IMF) over its 13th bailout package since the 1980s.
If an agreement isn’t struck soon, Pakistan will find it increasingly difficult to secure international loans, as its credit rating has been downgraded to junk.
Reports further stated that Saudi Arabia has conditioned fresh interest-bearing loans and investment on Pakistan implementing strict monetary and fiscal reforms along with a drastic reduction in its current account deficit – conditions similar to those set by the IMF.
Umar Karim, associate fellow at the King Faisal Center for Research and Islamic Studies, said Pakistani authorities are in a state of shock.
“While previously Saudi Arabia and other Gulf countries would bail Pakistan out off the back of a phone call from the foreign minister or the prime minister, this time around they are really being put through the mill,” Karim told media.
It is believed that on a recent trip, even the Pakistani military chief couldn’t convince Saudi Crown Prince Mohammed bin Salman to release emergency funding for the country.
Karim believes this sets a new precedent. “The Pakistani military chiefs have previously been a source of assurance to friendly countries, but the Saudis have now had enough of Pakistan’s civilian authorities squandering away these handouts,” he said.