ITFC loans $1.1bln to Pakistan for oil, LNG imports

ISLAMABAD: The International Islamic Trade Finance Corporation (ITFC), a member of the Islamic Development Bank Group, on Wednesday agreed to loan $1.1 billion to Pakistan for import of oil and liquefied natural gas (LNG) this year.

Minister for Economic Affairs Khusro Bakhtyar witnessed the signing ceremony of ITFC’s annual financing plan 2021 for Pakistan, amounting to $1.1 billion. Economic Affairs Division Secretary Noor Ahmed and ITFC Chief Executive Officer Hani Salem Sonbol signed the document.

State-owned Pakistan State Oil, Pak-Arab Refinery and Pakistan LNG Limited will utilise the financing to import crude oil, refined petroleum products and LNG during 2021, according to a statement. “This will be helpful to augment foreign currency reserves of the country and provide resources to meet the oil import bill,” it said.

With oil bills accounting for almost 20 percent of imports, Pakistan used to arrange external financing to support its fragile balance of payments position buoyed by remittances and debts. The import financing can be used as a breather to overcome fiscal imbalances.

Sonbol said Pakistan and ITFC have long standing cooperation since creation of ITFC in 2008. “Pakistan is the 2nd largest beneficiary of ITFC financing. ITFC will continue its support to meet financial needs of Pakistan for import of crude oil, petroleum products and LNG.” Last year, ITFC loaned $386 million to Pakistan for import of LNG and oil under a trade financing facility, which is a part of a framework agreement signed with ITFC in April 2018 for a total envelop of $4.5 billion over for a period of three years (2018-2020).

Oil demand is recovering as economic activities are coming back to normal following the last year’s inertia amid coronavirus lockdown. Consumption of oil and LNG is showing uptrend with revival of industrial sector and consumer demand.

Pakistan also uses deferred oil payment facility from regional exporters. This gives sufficient cushion to external account, reflecting in latest trade data. Despite 21 percent decline in imports of petroleum group by value, imports of main petroleum products and crude increased to 8.2 and 5.2 million tons in the July-January period compared to 5.7 and 4.5 million tons respectively in the corresponding period a year earlier, according to the Pakistan Bureau of Statistics. Bakhtyar said the financing commitments reflect confidence of international financial institutions in Pakistan’s economy. He underscored the importance of partnership between ITFC and Pakistan. “ITFC financing for import of oil and LNG was instrumental in the revival industrial sector of Pakistan economy,” he said. Further, both the sides agreed to enhance the portfolio including agricultural sector.