Pakistan, Saudi Arabia ink oil facility on deferred payment agreement

ISLAMABAD: Pakistan and Saudi Arabia have signed agreement to make oil facility on deferred payment up to $3 billion operational and Islamabad will get breathing space of $250 million on account of import of oil on monthly basis probably from next month, The News has learnt.

Top official sources at Finance Division confirmed to The News on Tuesday that the oil facility on deferred payment was signed during the visit of Crown Prince Mohammed bin Salman (MBS) and Islamabad was going to avail oil facility valuing $250 million on monthly basis. However, the oil facility on deferred payment from UAE has not yet been operationalised.

“This kind of breathing space will help us on account of balance of payment front but the relatively higher current account deficit (CAD) is causing pressures on foreign currency reserves on monthly basis which continuously resulted into depletion in the range of $1 to $1.5 billion. Until and unless we overcome this level of cash bleeding on monthly basis we cannot declare ourselves out of danger zone of eruption of balance of payment crisis,” top official sources said while talking to The News here on Tuesday.

Despite getting $6 billion assistance for mustering up reserves position since July 2018 from friendly countries including $3 billion from KSA, $1 billion UAE and $2 billion from China, the foreign currency reserves held by State Bank of Pakistan (SBP) continued to reduce and now stood at slightly over $8 billion.

Pakistan has been facing two edged sword as its foreign currency reserves are on decline owing to higher outflows of dollars in the presence of current account deficit and secondly the foreign debt and liabilities are also piling up at accelerated pace.

However, when contacted to former finance minister and renowned economist Dr Hafiz A Pasha on Tuesday, he said that Saudi Arabia had come forward to help Islamabad in a big way when the country was facing difficult situation at external front. He said that the oil facility would help reducing burden on import bill, he added.

The trade balance between Pakistan and Saudi Arabia stood at highly unbalanced as Pakistan’s exports to KSA was standing at $300 million per annum while imports were in the range of $3 billion. Dr Pasha said that Pakistan could boost up its exports especially in areas of halal meat, fruits and vegetable and for achieving the desired targets the quality standards would have to be improved to get our due shares.

Dr Hafiz Pasha said that Pakistani exports had witnessed increasing trends to KSA but again the focus was lost so there was huge market lying that could be exploited in order to get major chunk in months and years ahead.

When contacted to Finance Ministry’s Adviser and official spokesman Dr Khaqan Najeeb on Tuesday, he confirmed that the oil facility on deferred payment from Kingdom of Saudi Arabia was signed during the recent high level visit. “We will get oil facility of $250 million on per month basis,” he concluded.