EDITORIAL: According to a section of the media, Pakistan has requested the Kingdom of Saudi Arabia (KSA) for the existing USD 5 billion rollover for 10 years as opposed to on an annual basis, and a USD 5 billion oil facility instead of the existing USD 1.2 billion. The International Monetary Fund (IMF), under the existing USD 7 billion thirty-six-month Extended Fund Facility (EFF) programme, had initially requested the authorities to secure rollovers from the three friendly countries (Saudi Arabia, China and the United Arab Emirates) for the duration of the programme, with the sixth and final review scheduled for 15 September 2027.
Reports, however, indicated that all three countries insisted on an annual renewal of the rollovers, while assuring the Fund staff that the rollovers would be a routine matter if Pakistan remained on the Fund programme, entailing the implementation of all agreed harsh upfront conditions.
The ongoing conflict in the Middle East is visibly hastening the process of geopolitical changes with an associated negative impact on the world economy. A decline in trade due to fuel shortages raised the international prices of petroleum and products from USD mid-60s to USD 100 per barrel in just nine days. And Pakistan is not immune to these changes though their impact on our fragile economy is greater than those of other middle income countries.
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As of 27 February 2026, Pakistan’s foreign exchange reserves were USD 16,300 million — consisting of over USD 12 billion rollovers from three friendly countries. While there are some concerns as to whether the annual rollover pledge would be met by all the three countries yet the decision to seek a long-term loan as opposed to a short-term loan would, one hopes, entail lower applicable interest rate though deferring the loan for an additional nine years would increase the country’s total indebtedness — an increase that would be felt all the more acutely if the trade deficit continues to rise and the rupee value declines in terms of the USD — a decline that accounts for an ever-rising outlay on mark-up. In the revised estimates of last year mark-up accounted for 52 percent of total outlay.
Reports also suggest that the government has requested Saudi Arabia for securitisation of remittances, defined as enabling the government to use expected remittance inflows as collateral to issue bonds and facilitating access to international capital markets at lower interest rates. Additionally, the government has requested the kingdom to provide a guarantee for the issuance of sukuk (or other bonds). Previous administrations used the issuance of sukuk and Eurobonds not for development of physical and social infrastructure but for meeting its current expenditure needs, which constituted 95 percent of total outlay last fiscal year. One would hope that the incumbent administration uses these additional funds, if Saudi Arabia agrees, wisely; or, in other words, by increasing output that would enable the government to repay interest and principal as and when due.
It bears noting that Pakistan’s rating by international agencies has never been investment grade and despite a slight improvement in recent months the rating remains highly speculative, which explains why portfolio investment remains negative in spite of our discount rate being one of the highest in the region. The economic team leaders must realise that the economy requires considerable strengthening before we can reach investment grade.
And finally, the government has also reportedly requested Saudi Arabia to invest in the public investment fund to explore opportunities here though this is baffling, given the large number of Memoranda of Understanding already signed. It would have been preferable had the government sought the conversion of non-binding MoUs into binding contracts.
Copyright Business Recorder, 2026