According to official figures, Pakistan is returning USD 1 billion in Saudi Arabia’s low-interest loan

ISLAMABAD: Pakistan has returned $ 1 billion to Saudi Arabia as the second installment of a $ 3 billion soft loan, while Islamabad seeks a commercial loan from Beijing to offset pressure to raise another $ 1 billion next month Dollars to be paid back to Riyadh, officials said on Wednesday.

Analysts say it is unusual for Riyadh to push for money back. Lately, relations between Pakistan and Saudi Arabia, historically close friends, have been strained.

With the $ 1 billion outflow, Pakistan – which has central bank reserves of $ 13.3 billion – could face balance of payments problems after the next Saudi installment is paid off.

“China has come to our rescue,” a State Department official told Reuters.

An official from the Treasury Department said the Pakistani central bank was already in talks with Chinese commercial banks.

“We sent $ 1 billion to Saudi Arabia,” he said. Another $ 1 billion will be repaid to Riyadh next month, he said. Islamabad had returned $ 1 billion in July.

Although a $ 1.2 billion surplus in current account balance and a record $ 11.77 billion in the past five months have helped support the Pakistani economy, the return of Saudi money is still a setback.

Saudi Arabia granted a $ 3 billion loan and a $ 3.2 billion oil credit facility to Pakistan in late 2018. After Islamabad asked Riyadh for assistance to Kashmir, Saudi Arabia urged Pakistan to repay the loan.

Pakistani army chief General Qamar Javed Bajwa, who visited Riyadh in August to ease tension, met the Saudi ambassador in Islamabad on Tuesday.

The People’s Bank of China did not respond to a Reuters request for comment, and Riyadh did not provide details.

Washington has raised concerns that Pakistan and other developing countries may be stuck in a Chinese debt trap. She criticized Beijing’s plans for the China-Pakistan economic corridor, which pledged more than $ 60 billion to support infrastructure projects in Pakistan.