China has once again proved to be the iron brother country of Pakistan as it has offered $1.5 billion to repay the $2 billion Saudi Arabia debt. The remaining $1 billion is due in January 2021.
According to the details, Pakistan returned $1 billion to Saudi Arabia as the second instalment of a $3 billion soft loan with Chinese aid.
Earlier this year, Pakistan repaid $1 billion to KSA in the first quarter of the current fiscal year.
The money had been deposited in the central bank on December 15 2018 with a three years maturity period. Islamabad is repaying the amount ahead of schedule.
Both the countries have agreed to augment the size of a 2011 bilateral Currency-Swap Agreement (CSA) by an additional 10 billion Chinese Yuan or around $1.5 billion.
The CSA is a Chinese trade finance facility that Pakistan has been using since 2011 to repay foreign debt and keep its gross foreign currency reserves at comfortable levels instead for trade-related purposes.
According to the financial statement of the State Bank of Pakistan, Pakistan paid Rs20.5 billion in interest to China on using the $3 billion trade finance facility in the last fiscal year alone.
Pak Saudi Deal under Imran Khan Regime
After taking office, Prime Minister Imran Khan had twice flown to Saudi Arabia to secure the package, which provided space to the first-timer PTI government to negotiate a deal with the International Monetary Fund (IMF).
Saudi Arabia had agreed to offer $ 6.2 billion worth of financial package to Pakistan for three years. This included $3 billion in cash assistance and $ 3.2 billion worth of annual oil and gas supply on deferred payments.
As per the agreement, the Saudi cash and oil facility was for one year with an option to roll over the amount at the end of the year for a period of three years.
The Kingdom has claimed back its money ahead of the schedule. Pakistan was paying 3.2% interest on the $3-billion facility.