This would be the second time in the last six months that China has bailed out Pakistan to pay off Saudi debt
China agreed to provide Pakistan with $1.5 billion in support for repayment of the $2 billion debt to Saudi Arabia. This includes a debt payment of $1 billion today. The remaining $1 billion are due next month which will be the final tranche of the loan Saudi Arabia provided Pakistan with, a couple of years back. Both the State Bank and the Ministry of Finance declined to comment on the matter, calling it a “bilateral confidential matter”.
China earlier provided Pakistan with $1 billion to retire debt from Saudi Arabia in August as well. In recent times, the relations between Pakistan and Saudi Arabia have been blowing hot and cold, and the financial support from the oil-rich nation has mostly dried up.
According to reports, the loan was forwarded from the mutually agreed 2011 Currency-Swap Agreement (CSA). Under the understanding, the size of a 2011 bilateral agreement was increased by an additional 10 billion Chinese Yuan or around $1.5 billion. This reported increase ups the overall trade facility to 20 billion Chinese Yuan or $4.5 billion.
CSA is more beneficial for Pakistan compared with other loan options. The main benefit of this arrangement is that the additional $1.5 billion Chinese loans will not reflect on the book of the federal government and it will not be treated as part of Pakistan’s external public debt.