KARACHI: Pakistan hopes to finalize agreement with Kingdom of Saudi Arabia to avail import of oil on deferred payment in January 2019, officials told Arab News.
“The agreement with Saudi Arabia for import of oil on deferred payment will hopefully be signed in the month of January. The country will also start availing the facility in the same month,” Dr Farrukh Saleem, Government’s spokesman on Economy and Energy, said on Sunday.
The agreement, after finalization would be signed by the respective ministers of both the countries.
Saudi Arabia had agreed to support Pakistan with $6 billion bailout package, comprising $3 billion cash deposit and $3 billion worth of import of oil on deferred payment. The Saudi Fund for Development (SFD) and State Bank of Pakistan (SBP) will play facilitative role in the payments for import of oil from the KSA.
According to the agreement, the Saudi Aramco will supply around 110,000 barrels per day crude oil to Pakistan’s state run Pak Arab Refinery and National Refinery for refining.
Pakistan’s petroleum group imports including crude and Liquefied Natural Gas LNG stood at $13.26 billion during the last fiscal year FY 18 while the country has imported $6.8 billion worth of petroleum product during the first 5 months of current fiscal year FY 19, SBP data shows.
Pakistan’s economic managers hope that the country would benefit from the current price decline in the international market with the WTI futures trading at $45.33 whereas the global benchmark, Brent crude, trading at $53.21 per barrel, according to the Friday closing.
“We hope that the government will be able to save around $4 billion in the backdrop of current price decline in the international market,” Dr. Saleem said.
The oil prices have come down from an average high of $85 per barrels in the international market.
Pakistan is currently facing balance of payment imbalances of around $12 billion mainly due to rising imports and insufficient exports.
The oil facility being negotiated with the Saudi Arabia will help the country in supporting its balance of payment situation and foreign exchange reserves position.
Despite inflow of $2 billion from the Saudi Arabia and expected another $1 billion in January 2019, Pakistan’s foreign exchange reserves remain under pressure. “During the week ending December 21, 2018, SBP’s reserves decreased by $591 million to $7,457 million, due to external debt servicing and other official payments,” according to SBP.
The incumbent government led by Prime Minister Imran Khan who successfully secured the bailout package from Saudi Arabia during his two officials visit to the Kingdom is also seeking similar facility from the United Arab Emirates UAE.
The UAE has recently announced to deposit $3 billion in the account of Pakistan’s central bank. However, the officials say the talks with UAE for Saudi Arabia like facility of oil import on deferred payment are in progress.
Expected Saudi deferred oil facility will not be the first, Riyadh is going to offer to Islamabad, Pakistan had enjoyed the similar treatment in 1998 after the nuclear tests and country was under stern pressure.