No more interest-free loans: Saudi Arabia humiliate Pakistan

Saudi Arabia Pakistan loans: In the context of Pakistan, many geopolitical experts claim that Pakistan is too dangerous a nation to fall. It is the only Islamic nation that has nuclear power, and there is a threat of terrorists getting their hands on nukes. For this reason alone, it has always been pampered by the Islamic nations, despite Pakistan harbouring countless UN-designated terrorists and adopting terrorism as a policy of statecraft.

But it seems that this has come to a grinding halt. Pakistan’s friends in the Muslim world have now decided to abandon it and demolish its false sense of security. Earlier, Pakistan fostered the notion that it would keep functioning as a nation-state through financial aid, easy loans, or bailouts, and then divert this money to launch Jihad against India. But now it is facing utter humiliation from the Muslim world for constantly knocking at their gates with a begging bowl before paying earlier dues.

Saudi Arabia’s clear message to Pakistan is: No easy money for you

Pakistan’s all weather Muslim ally Saudi Arabia has dealt a significant blow to the country’s struggling economy. Saudi Arabia has decided not to provide any more interest-free loans or easy financial bailouts to Pakistan.

Further, the Saudi Kingdom has urged Pakistan to focus on the bailout deal with the International Monetary Fund (IMF). This has created a panic-like situation among Pakistan’s lawmakers, as Pakistan is literally on the verge of defaulting on the $80 billion in international loan repayments it has to make over the next three and a half years. Currently, it has only $3 billion in foreign exchange reserves.

Saudi Arabia has conveyed that it will decide to extend any loans only if Pakistan secures a deal with the IMF.

The Saudi Finance Minister, Mohammed al-Jadaan, revealed the new position earlier this year at the World Economic Forum in Davos.

Saudi Minister Al-Jadaan said, “We used to give direct grants and deposits without strings attached, and we are changing that. We are working with multilateral institutions to actually say We need to see reforms”.

Rubbing salt on Pakistani wounds Saudi minister further added that, “We are taxing our people, and we are expecting others to do the same, to do their efforts. We want to help, but we also want you to do your part.”

Saudi Arabia has frequently stepped up to help Islamabad out of its financial mess throughout a significant portion of history of Pakistan by providing zero-interest loans.

In contrast to this, in the past it only took a phone call from the prime minister of Pakistan or a visit from the army leader to convince Saudi Arabia to provide cash. But the recent comments made by its minister suggest that the Saudi Arabia has finally grown tired of inability of Pakistan to repay its loans.

Pak PM Shehbaz Sharif remarked earlier in January that it was dishonourable for a nation like Pakistan to hold a nuclear weapon in one hand and a begging bowl in the other.

This has compelled the Pakistani Finance Minister to lament that its friendly countries aren’t interested in helping Pakistan get out of its economic mess. Since its inception, Pakistan has constantly knocked at the IMF’s doors to get out of its economic mess, only to return a few years later. This will be its 13th bailout package since the 1980s.

In February, Pakistan’s inflation broke all previous records as the consumer price index reached 31.5 percent. This is the first time inflation has crossed the threshold of 31.5 percent in Pakistan since it started keeping records in July 1965.

In recent months, food and gasoline costs have risen to all-time highs as Pakistan’s import-dependent economy is unable to deal with the local currency’s depreciation. The Pakistani government has put into effect new tax policies recommended by the IMF in order to receive funds from the organization.

Kuwait demands upfront payments from Pakistan

Another Muslim friend, Kuwait, has urged Pakistan to pay for its purchases of gasoline and diesel in advance and to pay its debts on time.

In a handout from the finance ministry, it was stated that the Petroleum Division had provided a summary of the credit facility provided by the Kuwait Petroleum Corporation (KPC) against the supply of diesel under a contract with the Pakistan State Oil Company (PSO) since 2000 to the ECC.

Under the 2000 contract, Kuwait asked Pakistan to pay for the import of diesel and gasoline from the Gulf States in order to facilitate payment at a later time. Now, though, Kuwait requests payment in full from Pakistan and also requests that Pakistan pay its debt as soon as possible.

Later, Pakistan had to authorise additional assistance of about $330K to stop an impending default on Kuwait’s diesel purchase payments.

The additional funding to cover the cost of the diesel was agreed upon by the cabinet’s Economic Coordination Committee (ECC). According to reports, the finance ministry had instructed the accountant general of Pakistan revenue (AGPR) to delay the payment of a few non-salary invoices for a few weeks so that there would be money to pay Kuwait for the diesel and fuel.

Additionally, for the bailout package, the IMF has requested assurances from Pakistan regarding its external debts. Since early February, the IMF and Pakistan have been negotiating a deal that would transfer 1.1 billion USD to Islamabad. The financial organization wants Pakistan to receive a guarantee of up to 7 billion USD to close the balance of payments imbalance in the current fiscal year.

All-weather allies of Pakistan in the Muslim world have chosen to stop providing easy money and are also ridiculing their friend for constantly begging in front of them. Congratulations, Pakistan; you truly deserve this.