Pakistan asks UAE for $2bn deposit rollover

ISLAMABAD: Pakistan has been negotiating with the Kingdom of Saudi Arabia (KSA) for the provision of an additional $1 billion Saudi Oil Facility (SOF) on deferred payment for the ongoing calendar year 2024.

Islamabad has also made a request to the United Arab Emirates (UAE) for the rollover of $2 billion deposits to avert depletion in foreign exchange reserves (FER) held by the State Bank of Pakistan just before the holding of the general elections on February 8. These two developments have come to the surface when the IMF Executive Board is scheduled to meet in Washington, D.C., on Thursday (tomorrow) for the release of second tranche of $700 million for Pakistan under the $3 billion Standby Arrangement (SBA) programme.

Top official sources confirmed to The News on Tuesday that Pakistan made a formal request for a $1 billion Saudi Oil Facility (SOF) on deferred payment and negotiations were underway to finalize the terms and conditions. The Saudi Oil Facility (SOF) of $100 million per month expired in December 2023 and now both sides are holding parleys to finalize the deal.

When this scribe contacted top officials of the Finance Ministry and inquired about the Pakistani request for an additional $1 billion SOF from KSA, an official replied: “Need to check seriously”. When this scribe insisted that negotiations were underway, the official replied that he would check with the EAD.

The SOF from KSA was part of the overall financing envisaged by the Government of Pakistan under the IMF programme, which included the rollover of deposits from the Kingdom of Saudi Arabia, the UAE and China and commercial refinancing as well as additional SOF from the KSA.

Pakistan requires external debt servicing of $24.8 billion including a $13 billion rollover and commercial refinancing while the remaining amount would have to be repaid to avert default on repayment of external loans and obligations.

Pakistani authorities are showing confidence that they will be able to secure the rollover of $2 billion deposits from the UAE. Caretaker Prime Minster Anwaar-ul-Haq Kakar has written a letter to UAE President Mohamed bin Zayed Al Nahyan for the rollover.

Two separate deposits will mature during the ongoing month, the sources said, one on January 17 and the other on January 20. Loans were taken on 3% and 6.5% interest. The total amount of loans that the oil-rich Gulf state has deposited with the State Bank of Pakistan (SBP) is $3 billion, the sources noted. The foreign exchange reserves held by the central bank were recorded at a more than five-month high of $8.221 billion as of December 29, with the government hopeful of a further boost after a loan approval from the International Monetary Fund (IMF). The IMF has also confirmed its Executive Board would consider Pakistan’s request for completion of the first review and release the second tranche of $700 million on January 11 (tomorrow) in Washington, D.C.