Saudi Arabia has officially become the largest lender to Pakistan, providing deposits worth $5 billion at an interest rate of 4%, according to Finance Ministry officials.
The loans, considered far cheaper than other foreign financing options, have been a lifeline for Pakistan’s fragile economy.
Cheaper than Chinese, UAE loans
Officials revealed that Saudi Arabia extended two separate cash deposits at 4% interest, significantly lower than China’s 6.1% and the UAE’s 6.5%. In addition to these deposits, Saudi Arabia has also provided oil financing loans at 6%.
By comparison, Pakistan has borrowed $700 million from commercial banks at a much higher interest rate of 8.2%, while Chinese loans vary between 4.5% and 7.3%.
Loan rollovers, maturity
Saudi loans are rolled over annually without additional cost, making them easier to manage. Of the $5 billion, a $2 billion loan will mature in December 2025, while another $3 billion is due in June 2026.
The government is already preparing to roll over both loans to meet IMF conditions and ensure reserve stability.
Dependence on friendly nations
Alongside Saudi Arabia, Pakistan also relies on China’s $4 billion and the UAE’s $3 billion deposits. Together, the $12 billion from these three allies forms a crucial part of the State Bank of Pakistan’s foreign exchange reserves.
Economic impact
With reserves heavily dependent on foreign deposits, the government faces the challenge of balancing repayment obligations while ensuring compliance with IMF reforms. Officials stress that the Saudi loans remain the most affordable, making Riyadh a key partner in Pakistan’s financial recovery.
