Pakistan Seeks $1 Billion Oil Facility from Saudi Arabia Ahead of IMF Negotiations
This request is a part of a larger financing strategy agreed upon with the IMF. Meanwhile, the Islamic Development Bank's initial pledge of $3.3 billion has fallen short of expectations, with the bank considering a potential reduction to approximately $250-500 million due to challenges in securing dollar loans from international financial institutions.
Karobar
ISLAMABAD: The Pakistani government has formally requested Saudi Arabia to extend a $1 billion oil facility on deferred payment terms for the calendar year 2024. This request comes as Pakistan prepares for upcoming discussions with the International Monetary Fund (IMF).
According to inside sources, "Pakistan has initiated the formal request for a $1 billion Saudi Oil Facility (SOF) on a deferred payment basis, effective from January 2024. As of now, Saudi Arabia has not confirmed its agreement, and the specific terms and conditions, including associated costs, will be ironed out over the next few months."
This proposed oil facility is a vital element of the financing strategy jointly devised by the Pakistani government and the IMF under the $3 billion Standby Arrangement (SBA).
The existing SOF is set to conclude operations in December of this year.
During the current fiscal year, the final quarter (July-September) has witnessed Pakistan receiving $300 million so far. It was initially anticipated that an additional $300 million would be disbursed by the end of December 2023 under the current SOF agreement, which Saudi Arabia had already utilized to distribute a total of $700 million between March and September 2023.
In a related development, the Islamic Development Bank (IsDB) had initially pledged $3.3 billion under the ITFC mechanism, as confirmed by an anonymous official. However, it appears that this pledge has fallen short of expectations. The bank had initially agreed to allocate $1 billion for the duration of the current fiscal year.
Nevertheless, recent communication from the bank suggests that they may revise this amount, possibly reducing it from $1 billion to a range of approximately $250-500 million. A final decision from the IsDB is expected during its board meeting in December 2023.
The IsDB's team engaged in discussions with Pakistani authorities and cited various factors influencing this potential adjustment. These factors include the challenge of securing dollar loans from international financial institutions due to the prevailing high-interest rates worldwide.
