ISLAMABAD (our reporter):- Saudi Arabia have extended an oil facility on deferred payments worth $1.2 billion to Pakistan through Saudi Fund for Agreement (SFD) for further one year, it is learned.
Sources told the Voice of Public, the Saudi Arabia has extended the facility to Government of Pakistan through Saudi Fund for Development by the signing Financial Agreement for next one year worth of $1.2 billion. It is expected that Pakistan will avail the extended facility from March 23 to Feb 24, sources claimed.
It is pertinent to mention here that the SFD and Ministry of Finance/Economic Affairs executed an export finance agreement in Feb 2019 for imports of crude oil/refined petroleum products from Saudi Arabia on deferred payment basis.
Pakistan had imported oil worth $769 million on first year and $1.11 billion during the second year 2022-23. Under the facility, Pakistan imports oil on deferred payment basis worth $50 million every month, sources told the scribe.
The facility was for one year which was extended from time to time. Saudi Arabian Oil Company (Saudi Aramco) and Saudi Aramco Products Trading Company were designed exporter of crude oil/petroleum products by Saudi Govt. From Pakistani side PARCO and NRL as they have long term crude oil agreements with Saudi Aramco were designated importers.
As per agreement mechanism PARCO and NRL deposit the payments against their crude oil imports from Saudi Aramco in the GoP account with State Bank of Pakistan in equivalent PKR whereas the SFD maky payment to Saudi Aramco in USD.
The amount deposited by PARCO and NRL is accounted for as external debt by the Economic Affairs Division. The Government of Pakistan make repayment of principal, payment of margin and/ or related charges, if any, to the SFD on the maturity date of each export credit.
The Pakistani government shall also be liable to bear the exchange rate risk/differential in Pakistani Rupee due to variation to exchange rates over the period of deferred payments.
Pakistan government is also trying to import oil from Russia which is cheaper as compared to other international oil facility.
Sources told the scribe that the government wants to import first cargo of oil from Russia during this month.
They say that it will be challenge for Pakistan government to import oil from Russia including mechanism of payment and process of transportation of cargoes.
It is pertinent to mention here that Pakistan’s foreign reserves have been depleting alarmingly in recent weeks. The facility will help the government which is struggling to build forex reserves at a sustainable level to control the rupee devaluation against the US Dollar and to make timely foreign payments.