Bearing in mind Pakistan’s financial crisis and its history of repaying debts, Saudi Arabia this time established strict covenants for the nation ruled by Imran Khan in return for its $ 4.2 billion loan. According to Federal Information and Broadcasting Minister Fawad Chaudhry, Saudi Arabia agreed to pay Pakistan a $ 3 billion cash deposit for one year, with a caveat that the country would be required to return it at any time with three days’ notice.
According to a report by The Express Tribune, Imran Khan’s cabinet approved the deal on Saturday to deposit $ 3 billion cash and $ 1.2 billion in oil on the delayed facility deal through the release of summaries. Unlike in the past, this time Pakistan does not have a rollover option and is expected to repay the loan after one year. Additionally, in the event of Pakistan’s sovereign default, the country would be asked to repay the loan within 72 hours upon Saudi Arabia’s written request.
1.4 times higher loan interest rate
The report also quotes finance ministry sources as saying that the $ 3 billion liquidity facility was guaranteed at an interest rate of 4%. The rate is a quarter higher than the previous similar facility Pakistan secured at an interest rate of 3.2%, meaning Pakistan will pay $ 120 million in interest on the loan.
“Saudi Arabia has also clarified the default conditions, which would lead to the immediate withdrawal of cash deposits,” he added. L’Express Tribune these sources citing. “A delay in paying interest on time would be considered a breach of the agreement,” he added.
The strict clauses come after Pakistan rushed to repay Saudi Arabia $ 1 billion last year. The country finally managed to repay part of a loan after its all-time friend – China – came to Imran Khan’s rescue. A report from Pakistan’s finance ministry revealed that Saudi Arabia had provided the neighboring country with a financial package of $ 6.2 billion for three years in 2018, which Saudi Arabia claimed “ahead” of its schedule. Pakistan had repaid the loan to Saudi Arabia after taking out a loan of the same amount from China.