Pakistan to pay interest at higher rate on Saudi loan

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Pakistan will be paying the interest at a comparatively high rate on the $4.2b cash and oil facility it has been offered by Saudi Arabia, officials have confirmed.

The confirmation comes a day after the federal cabinet approved the Saudi aid package on Saturday.

A spokesperson of the federal finance ministry has hailed the Saudi package as a symbol of brotherly relations between Pakistan and Saudi Arabia.

The spokesman said Pakistan has secured the $3b loan from Saudi Arabia at an interest rate of 4% while the $1.2b oil on deferred payment facility has been secured at an interest rate of 3.8%.

The interest rate of about 4% is higher than the rate offered by the International Monetary Fund (IMF). In May 2009, the then Finance Minister Abdul Hafeez Sheikh disclosed that the $6b IMF loan for Pakistan carried an interest rate of 3.2%.

International financial institutions charge different interest rates for different countries based on their economic and security conditions. A country with a strong economy can get a loan at an interest rate as low as 1%.

Saudi Arabia in the past offered loans and the oil on deferred payment facilities to Pakistan at a comparatively low interest rate.

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