Pakistan’s external sector pressure subsided after Saudi Arabia rolled over a $5 billion debt for three years, coupled with $9b in foreign currency purchases from the local market in the last fiscal year, State Bank of Pakistan Governor Jameel Ahmad said on Wednesday.

The “three-to-five-year” rollovers of the short-term debts, which Pakistan had taken many years ago for one year, are part of the government’s new strategy to delay repayments and get breathing space before kick-starting the economy.

Due to the rollover of $5b cash deposits by Saudi Arabia till December 2028, Pakistan’s gross external financing requirements have come down to $21.5b for this fiscal year, the governor said while talking to The Express Tribune here in the Parliament House.

Pakistan has taken a total of $8b in cash deposits from Saudi Arabia, including $3b obtained in April this year. Out of this, the $5b deposits were rolled over every year before the kingdom granted some breathing space by giving up to a three-year extension.

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In April this year, Finance Minister Muhammad Aurangzeb said that the kingdom had extended a $5b deposit for a longer period, but he did not share further details about its next maturity.

In addition, Saudi Arabia had given $3b for three months, which also matured this month but was further rolled over. The central bank governor did not comment on whether the remaining $3b has been rolled over for three months or for a longer period.

Ahmad said that the interest costs on foreign debts have also reduced by nearly half a billion dollars, which also contributed to lowering the overall gross financing requirements for this fiscal year.

The external gross financing requirements are the sums needed to meet the external obligations. Pakistan has remained heavily dependent on foreign creditors for meeting its external financing needs for debt repayments and funding the current account deficit. Exports and foreign direct investment could not improve despite multi-front efforts, and in a latest push, the federal government approved Rs98b in subsidies for exporters for this fiscal year alone.

For the next fiscal year, the International Monetary Fund has projected $30b in external financing requirements.

But the governor said that the IMF’s projections for the next fiscal year were on the higher side, as the government was making efforts, and their success would bring down the overall external financing requirements even below this year’s level of $21.5b.

The government has reportedly reached out to Saudi Arabia and the United States for additional financing on a longer term to lessen the immediate heavy repayment requirements.

The governor said that out of the $21.5b, cash deposits were $7.3b and another $3.5b were foreign commercial loans maturing this year. He said that Pakistan also owed $250 million to Kuwait on account of cash deposits that have been rolled over for a long time.

He did not respond to a question about Pakistan’s recent request to the United States for a $10b credit financing line, saying the federal government should respond to it.

The governor added that Pakistan this month repaid a $1.3b Chinese commercial loan, which pulled down the foreign exchange reserves to $17.3b as of July 17. He said that China was again expected to refinance the $1.3b and could disburse the money next month.

Ahmad said that out of $21.5b total financing requirements for the current fiscal year, the net debt repayments were $7.5b. Out of this, $2.2b has already been repaid in July, which has lessened the pressure for the remainder of the fiscal year.

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While responding to a question, the governor said that the central bank also bought around $9b from the open market to cushion the foreign exchange reserves. He said that the total purchases during the past three years have reached $28b.

The monetary policy statement underlined this week that workers’ remittances are likely to grow as compared to last year and continue financing a large part of the higher projected trade deficit. With the realisation of planned official inflows and some likely improvement in private flows, SBP’s FX reserves are targeted to increase to $20.20b by the end of December 2026.

While speaking during a meeting of the Senate Standing Committee on Finance today, Ahmad said that the federal government did not allocate any subsidy for foreign remittances, adding that commercial banks would now pick up the cost of transfer of foreign remittances and the remitters would not be charged any extra fees.

The committee further reviewed banking service charges, including SMS alert charges and card transaction issues.

Ahmad informed the committee that SMS alerts were optional and subject to customers’ consent, while banks were introducing app- and email-based alerts as alternatives. He also informed the committee that Visa card transactions conducted within Pakistan would not be charged in US dollars.