China has agreed to bail out Pakistan by providing it with $1.5 billion to help to repay a $2 billion debt to Saudi Arabia, according to the Express Tribune.
Citing anonymous sources in the Finance Ministry, the report stated that Pakistan was set to repay the first $1 billion of the debt to Saudi Arabia today, with the second payment due in January.
The money was provided neither as a commercial loan nor from China’s State Administration of Foreign Exchange. Instead, it was given through the decision to increase the bilateral Currency-Swap Agreement (CSA) between the two allies by an additional 10 billion Chinse Yuan, approximately $1.5 billion.
Pakistan’s debt to Saudi Arabia was set after the Kingdom called in its own loan to its South Asian ally in August. The move was retaliation for the Pakistani government’s call for Riyadh to convene a meeting of the Organisation of Islamic Cooperation (OIC) to discuss the Kashmir issue.
The refusal to do so, and subsequent ending of the loan agreement — which was for $3 billion and an oil credit facility amounting to a further $3.2 billion — was a sign of the breakdown in relations between Riyadh and Islamabad in recent years. Bilateral relations deteriorated further when Saudi Crown Prince Mohammad Bin Salman refused to meet with Pakistan’s army Chief of Staff during the latter’s visit to Riyadh.
It was then that Pakistan’s Foreign Minister visited China, with the aim of strengthening relations with Beijing and to see what economic support it could offer.