Saudi rollover cuts Pakistan’s external financing need to $21.5bn: SBP chief

Saudi Arabia has rolled over $5 billion in deposits for three years, reducing Pakistan’s external financing requirement for the current fiscal year to $21.5 billion, SBP Governor Jameel Ahmad said. He also said the central bank bought around $9 billion from the local market last fiscal year to suppo ISLAMABAD: Saudi Arabia has extended the maturity of $5 billion in deposits with Pakistan for three years, helping reduce the country’s gross external financing requirement for the current fiscal year to $21.5 billion, State Bank of Pakistan Governor Jameel Ahmad said on Wednesday. Ahmad said the extension runs till December 2028 and has eased pressure on Pakistan’s external sector. He added that interest costs on foreign debt had also fallen by nearly half a billion dollars, further lowering the overall financing burden. Pakistan has a total of $8 billion in Saudi cash deposits with the central bank, including $3 billion received in April this year. Ahmad said the $5 billion portion, which had previously been rolled over annually, had now been given a longer tenure. He added that the remaining $3 billion, provided for three months, matured this month and was also rolled over, though he did not specify whether that extension was again short-term or for a longer period. The SBP governor said that, out of the $21.5 billion required this year, $7.3 billion relates to cash deposits and $3.5 billion to foreign commercial loans maturing during the fiscal year. He added that Pakistan also owes Kuwait $250 million in cash deposits that have been rolled over for a long time. Ahmad said net debt repayments account for $7.5 billion of this year’s external financing requirement, of which $2.2 billion had already been paid in July. He also said Pakistan repaid a $1.3 billion Chinese commercial loan this month, which brought total foreign exchange reserves down to $17.3 billion as of July 17, adding that China was expected to refinance the amount next month. Reserve support and remittances During the past fiscal year, the central bank bought around $9 billion from the local market to support reserves, Ahmad said. He added that total such purchases over the last three years had reached $28 billion. The latest monetary policy statement says workers’ remittances are expected to rise from last year’s level and continue to finance a large share of the projected trade deficit. With planned official inflows and some improvement in private flows, the SBP is targeting foreign exchange reserves of $20.20 billion by end-December 2026. For the next fiscal year, the International Monetary Fund has projected Pakistan’s gross external financing needs at $30 billion. Ahmad said that estimate was on the higher side and that the government was working to bring the requirement below even this year’s $21.5 billion. At a meeting of the Senate Standing Committee on Finance, Ahmad said the federal government had not allocated any subsidy for foreign remittances. He said commercial banks would bear transfer costs and remitters would not be charged extra fees. He also told the committee that SMS alerts were optional and subject to customer consent, while banks were introducing app-based and email alerts as alternatives. Ahmad added that Visa card transactions carried out within Pakistan would not be charged in US dollars.