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Wed 11 Nov 2009 12:54 PM

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Saudi Arabia grants Pakistan $380m loan

Loan is a part of $700m Saudi has pledged to give Pakistan at the Tokyo donors meeting - senior official.

Saudi Arabia has granted Pakistan a $380m soft loan to mainly support its budget, in the biggest single donation since donors pledged $5.7 billion of aid in April to the violence-torn country.

A senior Saudi official said the loan was part of $700m Saudi Arabia has pledged to give Pakistan at the Tokyo donors meeting.

Nations pledged $5.7 billion in aid to Pakistan but a fraction of that has trickled in, with donors wanting more details on how the money will be spent and amid questions over how well the fragile civilian government is functioning.

The Pakistani central bank will get $200m from Saudi Arabia for "budget spending", $100m will be a credit line to cover Pakistani imports of fertilizers from Saudi Fertilizers Co and $80m will help finance a hydropower project in Pakistan, the official said.

"This ($380m) loan was granted by the Saudi Development Fund which supports development in foreign countries by giving grants or soft loans," the official said.

"Saudi Arabia is so far Pakistan's biggest donor under the Tokyo agreement ... We will deliver the remaining $320m soon. We are working with Pakistani authorities to define areas of need," he added.

Saudi Arabia is Pakistan's top Arab ally. Some 1.7 million Pakistani expatriates who live and work in Saudi Arabia sent home $1.8bn in remittances in 2008, the official said.

The International Monetary Fund (IMF) has urged Pakistan to work harder on its own reforms and demanded that donors follow through on the aid promised for the Asian country.

The IMF bailed out Pakistan last November to avert a balance of payments crisis and in July it increased its loan to the country to $11.3bn from an initial $7.6bn.

Foreign Minister Shah Mehmood Qureshi said in August that Pakistan has so far received $300m in aid for internally dislocated people.

Islamabad's civilian government is fighting against Islamist militancy led by the Taliban in northwest Pakistan. (Reuters)

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