Pakistan could repay a $ 2 billion loan to Saudi Arabia and the cash-strapped country is looking for options for more loans to keep gross official foreign exchange reserves at their current level of over $ 12 billion. dollars, a newspaper report said on Saturday.

Saudi Arabia’s financial aid, originally estimated at $ 6.2 billion, had helped Prime Minister Imran Khan’s government avert an impending default on international debt obligations.

The second $ 1 billion of the Saudi loan matures next month and the government is likely to repay the money two years after the borrowing, the Express Tribune said, citing finance ministry sources.

“This is a confidential bilateral affair,” the finance ministry said on Friday in a terse response.

But a senior government official said on condition of anonymity that Pakistan could repay the money next month.

After coming to power, Prime Minister Khan had twice visited Saudi Arabia to secure the package, which allowed his government to negotiate a deal with the International Monetary Fund (IMF).

Saudi Arabia had agreed to provide a financial envelope worth $ 6.2 billion to Pakistan for three years. This included $ 3 billion in cash assistance and $ 3.2 billion in annual oil and gas supply in the form of deferred payments.

Under the agreement, the Saudi oil and liquidity facility was for a one-year term with an option to roll over the amount at the end of the year for a period of three years, according to the report.

Pakistan was paying 3.2 percent interest on the $ 3 billion facility, according to information the finance ministry shared with the National Assembly.

The Saudi oil installation has already been suspended while Pakistan also repaid Saudi Arabia $ 1 billion of the $ 3 billion in May this year.

The sources said the government is considering various options to repay the Saudi loan, which is on the balance sheet of the State Bank of Pakistan.

A senior finance ministry official said Pakistan could get $ 2 billion from China, as it last did when it repaid $ 1 billion to Saudi Arabia. The official did not explain whether the Chinese loans will be concessional or the commercial loans.

Chinese officials have privately expressed reservations about the slow progress on the China-Pakistan Economic Corridor (CPEC), but they are likely to bail out Islamabad due to the strategic nature of the relationship, according to the report.

The government has also not been able to reinstate the IMF’s suspended $ 6 billion program, making it difficult for it to sustain an uninterrupted inflow of foreign capital. The sources said that if the IMF’s program is not reinstated in the near future, the World Bank’s inflows may start to dry up.

The IMF does not comply with two conditions: the establishment of a mini-budget and the increase in electricity tariffs, which complicates things for the government already criticized for high inflation.

Program loans from the other two multilateral creditors have also been critical in returning $ 10.6 billion in loans maturing in the current fiscal year, excluding Saudi and UAE debt.

Pakistan’s gross official foreign exchange reserves of about US $ 12.2 billion are largely foreign borrowing.

Pakistan has also used a $ 3 billion Chinese trade finance facility to amortize its reserves. The $ 3 billion facility also expires in May next year, which Pakistan has decided to ask China to roll over.

In September this year, the central bank also borrowed USD 5.8 billion from commercial banks under forward and currency swap agreements, according to SBP data.

Just six months ago, in February 2020, when Pakistan implemented the IMF lending program, SBP borrowings under swap and forward contracts amounted to $ 2.9 billion, including $ 1.6 billion in long-term contracts.

After excluding all short-term liabilities, the central bank’s reserves are negative by around $ 10 billion, according to the report.

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