Pakistan will pay interest at a relatively high rate on the $ 4.2 billion cash and oil facility offered to it by Saudi Arabia, officials have confirmed.
The confirmation comes a day after the federal cabinet approved Saudi aid on Saturday.
A spokesman for the Federal Ministry of Finance hailed the Saudi package as a symbol of fraternal relations between Pakistan and Saudi Arabia.
The spokesperson said Pakistan secured the $ 3 billion loan from Saudi Arabia at a 4% interest rate while the $ 1.2 billion deferred payment facility was guaranteed to an interest rate of 3.8%.
The interest rate of around 4% is higher than the rate offered by the International Monetary Fund (IMF). In May 2009, then Finance Minister Abdul Hafeez Sheikh revealed that the IMF’s $ 6 billion loan to Pakistan had an interest rate of 3.2%.
International financial institutions charge different interest rates for different countries depending on their economic and security conditions. A country with a strong economy can get a loan at an interest rate as low as 1%.
In the past, Saudi Arabia has offered loans and oil on deferred payment facilities to Pakistan at a relatively low interest rate.
The higher interest rate would cost Pakistan $ 24 billion more than what the country paid for the same facility in 2018 under the PTI government.
A report carried by Express stand Sunday claimed that Pakistan had agreed to strict conditions for the repayment of the loan: it would have no rollover option and would have to repay the $ 3 billion loan one year after the date of deposit.
However, the finance ministry spokesman said each memorandum of understanding contains provisions for dispute resolution. “This does not mean that the sovereignty of the country has been compromised,” the spokesperson said.
The finance ministry said the Pakistani government was grateful to Saudi Arabia for providing assistance “in this need of the hour” and that the loan agreements reflected strong fraternal relations between Pakistan and Saudi Arabia. Arabia.
Saudi Arabia announced the $ 4.2 billion package for Pakistan in October after Prime Minister Imran Khan and his team visited Riyadh and met with Saudi Crown Prince Mohammad Bin Salman.
Under the agreements, the Saudi Fund for Development “would deposit US $ 3 billion in the State Bank of Pakistan to help the Pakistani government sustain its foreign exchange reserves and cope with the impacts of the pandemic. coronavirus, ”SPA reported. at the time.
“In addition, the royal directive was issued to finance the trade in petroleum derivatives for a total amount of US $ 1.2 billion throughout the year,” he added.