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Current Affairs

Saudi Arabia’s bailout of Pakistan

Date: 11 May 2022 Tags: Miscellaneous


Pakistan has managed to secure $8 billion bailout package from Saudi Arabia. The development occurred after a meeting between Pakistani Prime Minister and Saudi Crown Prince.



Pakistan is plagued by dwindling forex reserves, high inflation, depreciating currency and current account deficit.



The benefits include oil financing facility, additional money through deposits or Sukuks, and rolling over of the existing $4.2 billion facilities.


Saudi-Pakistan relations

  • Saudi and Pakistan have had cordial relations since Pakistan’s independence. They even signed a ‘treaty of friendship’ in 1951.

  • Treaties have been signed regarding security, education, taxation, trade, religious affairs, culture, economy, and investments.

  • Pakistan’s exports to Saudi make up 1.77% of its total exports while imports are mainly oil and related products.


Deterioration of ties

  • After abrogation of Article 370, Pakistan aimed to get the Muslim world to condemn the move through OIC.

  • Pakistani leaders accused Saudi and UAE of ‘diluting’ the stand of the Islamic world on the Kashmir to gain from the large Indian energy requirement.

  • Angered by the accusations, Saudi and UAE demanded back loans given to Pakistan and also rolled back the concessional sale of fuel on deferred payment.

  • Pakistan had to borrow $1.5 billion from China in order to repay the $2-billion Saudi Arabian debt.

  • Recently, Saudi has demanded Pakistan pay back its entire $3-billion loan within a year with four percent interest.


Other Saudi support

  • $200 million to finance the purchase of urea fertilizers

  • $80 million for the construction of the Neelum-Jhelum Hydropower Plant

  • $100 million to Internally Displaced Persons in the Malakand region and humanitarian supplies for flood events.