Saudi Demand: Financial Woes Worsen For Pakistan

Cash-strapped Pakistan must return Saudi Arabia USD three billion within a year, with four percent interest on the loan each quarter, Finance Minister Shaukat Tarin informed the Senate on Friday, February 11, adding to worsening of financial woes. Saudi Arabia had in October last 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.

This was expected to help Pakistan convince the International Monetary Fund (IMF) about its financing plan. Its representatives asked Islamabad last week to “do more” on economic reforms, and go beyond merely hiking the taxes.

The hike has been unpopular with the people causing public discontent. Pakistan has the lowest tax levying and collection in South Asia.
The Tarin bombshell in the Pakistan Senate comes when it is still not clear if China, that Prime Minister Imran Khan visited last week, conceded to an urgent USD three billion loan.

Tarin gave some more details. The loan amount would have to be returned in one go. He defended the interest rate. “Interest rates are rising across the world. The interest rate for the Saudi loan being four per cent is not something bad,” he said.
There was no scope for deferred payment on either count. Had there been any, it would have been mentioned in the original loan agreement, the minister said.
The Saudi demand indicates that the deterioration in bilateral ties started over two years back persists. Saudi Interior Minister was in Islamabad just three days back, when he was received, not just by his counterpart, but also by Prime Minister Imran Khan and President Alvi. All these leaders praised the Saudi support in superlative terms and that the Gulf partner was “an indispensable partner.”

The visit last year by Crown Prince Mohammed bin Salman when he was accorded a red-carpet welcome, did not help in reducing tensions that began with Foreign Minister Shah Mahmood Qureshi demanding that Riyadh convene an OIC meet to discuss the Kashmir dispute with India. The minister alluded to Saudi and other Gulf nations being ‘silent’ on the issue because they valued the growing economic ties with India more.

This angered the Saudis and the UAE, both of which sought back loans given to Pakistan on longer period and also rolled back the concessional sale of fuel on deferred payment. The two Gulf nations have been irritated with Pakistan over the latter’s moves to get closer to Turkey, their rival in Islamic nations’ politics.

They have also not taken kindly to repeated accusations by Khan and his ministers that the Gulf nations were ‘diluting’ the stand of the Islamic Ummah on the Kashmir issue to gain from the large Indian energy requirement. Playing the India/Kashmir card in the Islamic world, particularly the Gulf nations have thus been counterproductive for Pakistan.

About the Author
Fabien Baussart is the President of CPFA (Center of Political and Foreign Affairs)
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