Riyadh rolls over its $3bn deposit for a further period, while Finance Minister Muhammad Aurangzeb signals that Pakistan can proceed without the proposed $10bn US liquidity facility. The government plans fresh international bond issues and aims to reduce external debt by $4bn during the current fiscal year.
ISLAMABAD: Pakistan has secured a further rollover of $3 billion in financial support from Saudi Arabia, providing relief to its external financing position as the prospects of a proposed $10 billion liquidity facility from the United States appear increasingly uncertain.
Finance Minister Muhammad Aurangzeb confirmed the extension while speaking to journalists at Parliament House on Wednesday. He said Riyadh had agreed to extend the $3bn financing it had provided in April to help Pakistan meet its external repayment obligations, including a financing gap associated with $3.5bn in repayments to the United Arab Emirates.
The Saudi facility had reached maturity on October 31 under its original three-month arrangement. Its extension removes an immediate repayment pressure and provides additional support to Pakistan’s foreign exchange position.
“It has been extended and for a reasonable period. You don’t need to worry as to for how long given the kind of strategic relationship we have,” Aurangzeb said in response to a question about the rollover.
The finance minister also referred to his recent meeting with Saudi Finance Minister Mohammed Al-Jadaan on the sidelines of the World Bank-IMF meetings in Bangkok, describing it as a very good meeting. Saudi Arabia has separately extended its existing $5bn deposit facility for Pakistan until 2028.
The latest rollover comes at a critical point for Pakistan’s external financing strategy. The government is seeking to maintain foreign exchange reserves, meet upcoming debt repayments and gradually reduce its dependence on short-term borrowing. At the same time, it is exploring international capital markets to secure financing with longer repayment periods.
Islamabad lowers expectations of $10bn US facility
The Saudi extension has assumed additional importance as expectations surrounding Pakistan’s request for a $10bn Exchange Stabilisation Support Facility (ESSF) from the United States have weakened.
Pakistan had approached Washington for the proposed facility in July. The request was intended to provide liquidity support to the country and strengthen its capacity to manage external financing pressures.
Aurangzeb, however, sought to clarify that the facility was not essential to the government’s current financing plans. He said Pakistan had already achieved one of its principal objectives: regaining access to international capital markets.
“What we asked for back in July and were looking at was the market access. We have got the market access,” he said.
He referred to Pakistan’s $3bn bond issuance in September, which attracted orders worth approximately $6bn. The response, according to the minister, demonstrated that international investors were willing to provide financing to Pakistan through capital markets.
Aurangzeb said the proposed US facility, if secured, would provide additional liquidity support. However, the government would continue with its financing strategy even if the arrangement did not materialise.
“If that (ESSF) materialises, fantastic, it will be a liquidity support facility. Otherwise, we have plans for further Eurobond issuance, Panda bond issuance and rupee-linked dollar-settled bond,” he said.
The statement indicates a shift in emphasis from securing a specific bilateral liquidity arrangement towards diversifying financing sources. Rather than depending on the proposed US facility, Pakistan intends to raise funds through a combination of international bonds and private placements.
The distinction is important. A liquidity support facility can strengthen a country’s ability to manage immediate external financing needs, while bond issuances provide funds through borrowing from investors, usually with defined repayment periods and financing costs. Both can support reserves, but they have different terms and implications for future debt obligations.
Government seeks to strengthen reserves through capital markets
The finance minister rejected the suggestion that Pakistan had sought additional support from Saudi Arabia beyond the rollover already secured. He said the country’s foreign exchange reserves covered more than three months of imports and were expected to improve further.
According to Aurangzeb, the government was targeting four months of import cover by the end of the year through access to capital markets.
Foreign exchange reserves are an important indicator of a country’s ability to meet external payment obligations. They help finance imports, service external debt and provide a buffer against sudden pressure on the balance of payments. Import cover measures how long a country’s reserves could finance its imports if other sources of foreign exchange were unavailable.
Pakistan’s effort to increase import cover is therefore linked to its broader objective of reducing vulnerability to external financing shocks.
Aurangzeb said he had held meetings with between 70 and 80 institutional investors during the recent meetings in Bangkok. He added that investors had a clear understanding of Pakistan’s economic position and that financing offers were available for five-year and 10-year maturities.
The government, he said, was looking beyond the current International Monetary Fund programme and seeking to establish a more sustainable relationship with international capital markets.
The availability of longer-term financing could help Pakistan reduce the pressure created by short-term repayments. However, the cost of borrowing, currency exposure and repayment obligations will remain important considerations when selecting financing instruments.
US economic engagement extends beyond the proposed facility
Aurangzeb also emphasised that Pakistan’s financial engagement with the United States should not be viewed exclusively through the proposed $10bn liquidity facility.
He said the government was pursuing a broader economic relationship in which US institutions could support American investors and exporters operating in Pakistan.
The finance minister specifically referred to the US Export-Import Bank and the Development Finance Corporation (DFC), saying these institutions could provide support for investment and trade-related activities.
“That is real financing and real credit,” he said.
He distinguished this type of financing from the ESSF request, which was intended to provide liquidity support to the Pakistani sovereign. In his view, support from US financial institutions for investors and exporters could create a more direct economic relationship by facilitating business activity and financing commercial projects.
Aurangzeb maintained that Pakistan would continue its plans regardless of whether the proposed liquidity facility was approved.
“If possible, fine; if not, we are going to move forward, with or without it,” he said.
The finance minister also confirmed that the IMF Executive Board meeting to approve a disbursement of $1.2bn to Pakistan was expected to take place in December. The proposed disbursement is part of the country’s ongoing engagement with the Fund and remains an important element of its external financing arrangements.
Government targets $4bn reduction in external debt
Separately, Aurangzeb told the Senate Standing Committee on Finance that Pakistan was targeting a $4bn reduction in external debt during the current fiscal year. The government intends to reduce it by a further $3.5bn next year, compared with a reduction of $4.5bn recorded in the previous fiscal year.
He said the government’s strategy was to replace expensive short-term borrowing with longer-maturity financing through international bonds and private placements.
The objective, according to the minister, is to reduce refinancing risks rather than increase the country’s overall external debt.
Pakistan’s external debt has expanded considerably over the past decade. Aurangzeb said it had increased from approximately $45bn in fiscal year 2014-15 to around $100bn. However, he noted that the annual increase had slowed to approximately $1bn over the past two years, compared with annual increases of $5bn to $6bn in earlier periods.
“Our objective is not to increase external debt. All the transactions like Eurobond, Panda bond or private placements have been replacement bonds to replace expensive with cheaper facilities,” he told the committee.
The government’s approach reflects an attempt to improve the structure of its borrowing. Short-term debt can create significant pressure when large repayments fall due within a limited period. Longer-maturity financing spreads repayment obligations over time and can reduce the frequency with which the government needs to refinance existing liabilities.
However, replacement borrowing does not eliminate debt obligations. Its effectiveness depends on whether the new financing is secured at lower costs, carries manageable repayment terms and reduces the overall risks associated with external liabilities.
Aurangzeb also said fiscal discipline had helped contain both the fiscal and current account deficits. Despite the country’s oil and wheat import requirements, he expected the current account deficit to remain at no more than 1 per cent during the current fiscal year.
He described the improvement in economic indicators as hard-earned stability, arguing that it had helped the country build financial buffers to meet its requirements despite floods and regional conflict.
The minister said foreign exchange reserves had crossed $21.5bn, describing this as the highest level in Pakistan’s history. He stressed that the country could not afford to lose the stability achieved through recent economic measures.
Finance secretary reports decline in public debt ratio
Finance Secretary Imdadullah Bosal also briefed the Senate committee on the country’s debt position.
He said public debt had declined to 68.6 per cent of gross domestic product (GDP) by the end of June 2026, compared with 75.1 per cent in fiscal year 2022-23.
According to the secretary, year-on-year growth in public debt slowed to 7.7 per cent during the last fiscal year, the lowest rate recorded in two decades.
He informed the committee that domestic debt stood at Rs58.8 trillion at the end of August 2026, compared with Rs68.4 trillion at the end of June. Foreign debt, meanwhile, remained stable at $98.2bn.
Bosal also outlined the government’s remaining external financing requirements. He said net financing requirements stood at $11bn after accounting for rollovers and refinancing. Of this amount, Pakistan had already repaid $5bn during the first four months of the current fiscal year, leaving approximately $6bn payable over the following seven months.
These figures underline the importance of maintaining access to external financing and managing repayment schedules. Even when debt indicators improve relative to GDP, the government must continue to secure sufficient foreign exchange to meet obligations falling due during the year.
The combination of Saudi support, international bond issuances and the expected IMF disbursement is intended to help meet these requirements while strengthening the country’s external financial position.
Senate committee raises concerns over access to foreign exchange
The Senate Standing Committee on Finance, chaired by Senator Saleem Mandviwalla, also took up the difficulties parliamentarians face when seeking foreign exchange for personal travel.
Committee members expressed strong dissatisfaction with the procedures imposed by banks and the State Bank of Pakistan (SBP), describing the treatment of parliamentarians as humiliating and unacceptable.
The concerns centred on clearance requirements for politically exposed persons (PEPs) and the requirement for parliamentarians to appear personally before exchange companies, even when they had submitted valid passports, travel tickets and visas.
Mandviwalla directed the SBP to review the existing procedures and examine whether the requirements were justified.
The committee also expressed serious displeasure over the central bank’s written response, dated October 30, 2026, to a letter sent by the committee secretary on its behalf to the SBP governor. Members objected that the response had been issued by an officer at the deputy director level rather than an appropriately senior authority.
The committee chairman described the requirement for personal appearance as humiliating and called for an immediate review of the procedures. He warned that the committee would take serious notice if the matter remained unresolved.
The issue highlights a broader question concerning the implementation of financial regulations. Banks and financial institutions are required to follow procedures designed to prevent financial irregularities and comply with regulatory obligations. However, the committee’s concern was that these requirements should not create unnecessary administrative obstacles for individuals who have submitted the required travel documents.
The SBP has been asked to review the procedures, particularly those relating to politically exposed persons and foreign exchange transactions.
A financing strategy under pressure
Pakistan’s latest financial developments reflect a broader effort to manage external debt while maintaining confidence among international investors. The Saudi rollover provides immediate relief, while the government’s plans for Eurobonds, Panda bonds and other financing instruments indicate an attempt to diversify sources of external funding.
The proposed $10bn US facility remains uncertain, but the finance minister has signalled that the government does not intend to make its financing strategy dependent on that arrangement.
The central challenge will be to convert improved access to international capital markets into a more sustainable debt structure. Securing longer-term financing at manageable costs could reduce refinancing pressures, but new borrowing must also be assessed against its impact on future repayments and foreign exchange requirements.
The government’s target of reducing external debt by $4bn during the current fiscal year is therefore significant. Achieving it will require careful management of repayments, continued access to financing and the preservation of the reserves that have been built through recent economic measures.
For Pakistan, the test of financial stability will not simply be the ability to secure rollovers or issue new bonds. It will be whether the country can reduce its dependence on repeated external borrowing while maintaining sufficient reserves to meet its international obligations.
