Daily Times

Ideally, this should not have been welcoming news, but given the gravity of Pakistan’s trembling economy, we are relieved that Saudi Arabia has rolled over the $3 billion debt repayment period by another year. The government had initially promised to pay back this debt in 2022. Sadly, this extension becomes the third rollover in as many years. It only shows the government’s persistent failure to generate non-debt-creating foreign inflows.

Is this the last rollover? Sadly, no. The government has put more extension requests on hand in the months ahead. It needs to manage at least $13 billion in repayments to Saudi Arabia, China, and the UAE. Another $2 billion Saudi deposit is due by mid-June next year- hardly seven months left. It is clear Pakistan will seek another rollover for that too. This dependence on extensions is eroding the country’s financial credibility.

Saudi Arabia’s gesture, through the Saudi Fund for Development, shows its goodwill and support for Pakistan. Saudi Arabia is traditionally not a creditor; its generosity starts and ends with deferred-payment oil consignments. But Pakistan managed to fetch debt from the kingdom, first placed in 2021, a lifeline for Pakistan’s foreign exchange reserves. But goodwill alone cannot save a sinking ship. We must acknowledge that these rollovers are temporary fixes to a deep-rooted problem.

A share of Pakistan’s external debt is owed to bilateral creditors. China is the largest lender. Who can forget the familiar names like the International Monterey Fund, World Bank and the Asian Development Bank? So many helping hands! Unlike the bilateral debts, these multilateral loans are paid on time. Saudi Arabia and China might see the double standard that might come back to haunt us.

The debt policy-avoiding default through extensions-is only compounding the problem. The growing debt stock and soaring interest payments are stifling Pakistan’s economic potential. Alarmingly, the World Bank has reported that Pakistan made the second-largest interest payments in the region. The government and the International Monetary Fund may see these rollovers as a solution. The cycle of borrowing and extensions must end. *