Pakistan trying to get IsDB financing, revive Saudi oil facility

ISLAMABAD: Pakistan is exploring two options now, including securing syndicate financing from the Islamic Development Bank (IsDB) and making a last-ditch effort to convince Riyadh for provision of the Saudi Oil Facility (SOF), after the IMF raised a red flag about the possibility of SOF.

Prime Minister Shehbaz Sharif made several visits to the Kingdom of Saudi Arabia (KSA) after assuming reins of power in recent months, but so far the Saudi Oil Facility (SOF) could not be firmed up. In another effort, the KSA may consider the SOF for next 12 months from January or February 2025.

Islamabad is likely to make a formal request to the IsDB’s ITFC [International Islamic Trade Finance Corporation] arrangement for jacking up its financing for procurement of oil from $400 million to $1 or $1.2 billion depending upon the offered rates for enhanced loan facility.

The syndicate financing facility from ITFC might prove expansive as it would be hovering over the Secured Overnight Financing Rate (SOFR) standing at 4.59 per cent plus some other charges. It’s difficult to ascertain its rate for the upcoming facility but the chances persist that it might go close to 9 to 10 per cent after incorporating all kinds of charges. The SOFR is a measure of the cost of borrowing cash overnight using treasury securities as collateral. It’s calculated from transaction data in the US treasury repurchase market.

Sources said Pakistan had already availed oversubscribed the ITFC facility and got around $267 million facility in previous months against the expected instalment of $200 million. Earlier, the IsDB had agreed to extend financing of $400 million but now it was formally requested by the IsDB for enhancing the facility up to $1.2 billion. When contacted to Minister for Economic Affairs Ahad Cheema for seeking his comments last week, he replied that “both options are open” while answering a query regarding SOF or ITFC from IsDB.