Pakistan’s Financial Strategy: Seeking Support from Saudi Arabia and China
Pakistan is working to address a $5 billion external financing gap with help from Saudi Arabia and China. The country aims to secure a debt rescheduling agreement with China and deferred oil payments from Saudi Arabia. These efforts are part of Pakistan’s strategy to meet conditions under a $7 billion bailout package with the International Monetary Fund (IMF).
Support from China and Saudi Arabia
China’s Exim Bank has committed to rolling over $3.4 billion in project debt, while Saudi Arabia has agreed to provide a $1.2 billion oil facility. These assurances were given when the IMF board approved the bailout package.
Pakistan’s Commitment to IMF
Pakistan has requested the IMF to reconsider changes to the Pakistan Sovereign Wealth Fund (PSWF) law. The government has hired Alvarez & Marsal Sovereign Advisory Services to advocate for its position. Pakistan aims to fill the $5 billion gap between 2024 and 2027, with $2.5 billion needed for the current fiscal year.
Debt Rescheduling and Legal Amendments
Pakistan seeks to reschedule $3.4 billion in Chinese debt, with $750 million due next year. The government has agreed to amend the PSWF Act to align with IMF requirements, including prohibiting the direct sale of assets to foreign countries.
Doubts Revealed
Pakistan -: Pakistan is a country in South Asia, located next to India. It has a large population and is known for its diverse culture and history.
Saudi Arabia -: Saudi Arabia is a country in the Middle East, known for its vast deserts and as the birthplace of Islam. It is also one of the world’s largest oil producers.
China -: China is a large country in East Asia, known for its rich history and as one of the world’s most populous nations. It is a major global economic power.
$5 billion gap -: A $5 billion gap means that Pakistan needs $5 billion more than it currently has to meet its financial needs. This is a large amount of money that the country is trying to find.
Debt rescheduling -: Debt rescheduling is when a country or person changes the terms of their debt to make it easier to pay back. This can include extending the time to pay or reducing the amount of each payment.
Deferred oil payments -: Deferred oil payments mean that Pakistan would pay for oil from Saudi Arabia at a later date instead of right away. This helps Pakistan manage its money better in the short term.
IMF bailout package -: The IMF, or International Monetary Fund, is an organization that helps countries with financial problems. A bailout package is a plan where the IMF gives money to a country to help it recover financially.
Pakistan Sovereign Wealth Fund -: A Sovereign Wealth Fund is a state-owned investment fund. Pakistan’s Sovereign Wealth Fund is a fund that the government uses to invest money for the country’s future.
2024 and 2027 -: These are years in the future. Pakistan is planning how to manage its finances between these years to ensure it can meet its financial needs.
