Pakistan in talks with Saudi Arabia, China for financial support: report

• UAE loan repayment due by month end.
• Saudi minister visited Islamabad recently.
• China remains Pakistan’s largest bilateral creditor.

Pakistan is holding talks with Saudi Arabia and China to secure financial support as it prepares to repay a roughly $3 billion loan to the United Arab Emirates, according to people familiar with the matter, Bloomberg reported.

The talks, The News reported, citing Bloomberg, involve loans and investment, the people said, asking not to be identified because the talks are private. The amount of support under discussion is more than $3.5 billion, one of the people said.

Pakistan failed to reach an agreement with the UAE to roll over the debt for the first time in seven years. Islamabad will now repay the amount by the end of this month, putting significant strain on its foreign exchange reserves, which stand at about $16 billion, enough to cover just three months of imports.

Pakistan’s Ministry of Finance, the Ministry of Foreign Affairs and Saudi Arabia’s Ministry of Media didn’t immediately respond to requests for information. Saudi Arabia’s Finance Minister Mohammed Al-Jadaan was in Islamabad on April 10 to hold talks with officials just before Pakistan hosted high stakes peace talks between the US and Iran this weekend. In his meeting with the Saudi minister, Pakistan’s Prime Minister Shehbaz Sharif expressed “strong commitment to expanding its cooperation with the kingdom in all spheres, particularly in trade, investment, and economic development,” according to an official readout from his office.

The two countries have steadily increased their economic and security ties in recent months, at the same time that relations between Saudi Arabia and the UAE have frayed. Saudi Arabia announced on the weekend that Pakistan had sent fighter jets to the kingdom under their mutual defence pact to bolster security in the country and the region.

Iran has targeted the kingdom and other neighbours in the Middle East with missile strikes in retaliation for their ties with the US.

The UAE hasn’t disclosed the reasons for calling in its loan to Pakistan. Pakistan’s Ministry of Foreign Affairs has sought to downplay media speculation that it was linked to a possible political fallout between the two countries, saying last week the move was a “routine financial transaction.”

A person familiar with the matter said the UAE had requested a rollover period of less than a year, which Pakistan didn’t accept. Pakistan also has close economic ties with China, its biggest lender, to whom it owes more than $25 billion. Islamabad is making attempts to start the next phase of the China-Pakistan Economic Corridor under Beijing’s Belt and Road Initiative as a follow-up to the about $60 billion first phase initiated more than a decade ago.

The International Monetary Fund (IMF) also reached an initial agreement with Pakistan last month for the disbursement of a loan instalment of about $1.2 billion from a $7 billion funding program. Pakistan has received about two dozen bailouts from the global lender since the 1960s.