Pakistan bound to return Saudi Arabia's $3 billion loan within 72 hours of request: Report

Keeping in mind Pakistan's financial crisis and its prior records of paying back debts, Saudi Arabia this time has laid down stringent clauses for the Imran Khan-led nation in exchange for its $4.2 billion loan package. According to Federal Minister for Information and Broadcasting Fawad Chaudhry, Saudi Arabia has agreed to give a $3 billion cash deposit to Pakistan for a year with a caveat that the country would be bound to return it anytime on a three-day notice.

According to a report by The Express Tribune, the Imran Khan cabinet on Saturday approved the $3 billion cash deposit agreement and $1.2 billion oil on deferred facility agreement through the circulation of summaries. Unlike in the past, this time Pakistan has no option for rollover and would have to return the loan back after one year. Moreover, in case of a sovereign default by Pakistan, the country would be asked to pay back the loan in 72 hours of a written request by Saudi Arabia.

Interest rate on loan 1.4 times higher

The report also quoted Finance Ministry sources saying that the $3 billion cash facility has been secured at an interest rate of 4%. The rate is one-fourth times higher than the previous similar facility that Pakistan had obtained at a 3.2% interest rate, which means that Pakistan will pay $120 million interest on the loan.

"Saudi Arabia has also spelled out the terms of defaults, which would lead to the immediate withdrawal of the cash deposits," The Express Tribune said quoting sources. "A delay in timely interest payment would be deemed as default on the agreement," it added.

The stringent clauses come after Pakistan scrambled to pay back Saudi's USD 1 billion last year. The country ultimately managed to pay back part of a loan after its all-weather friend - China - came to Imran Khan's rescue. A report by Pakistan's Ministry of Finance information revealed that Saudi Arabia provided the neighbouring country with a $6.2 billion financial package for three years in 2018 which Saudi claimed back "ahead" of its schedule. Pakistan had repaid the loan to Saudi after taking a loan of the same amount from China.

(Image: PTI)