ITFC to lend $761.5mln to fund petroleum products’ imports

Islamabad: Pakistan will get funding of $761.5 million from the International Islamic Trade Finance Corporation (ITFC) to finance imports of crude oil and petroleum products, finance ministry said on Wednesday.

A financing agreement amounting to $761.5 million has been signed between the ministry of Economic Affairs, government of Pakistan and International Islamic Trade Finance Corporation for import of crude oil, refined petroleum products and LNG etc,” the ministry said in a statement.

The financing agreement was signed by Mian Asad Hayaud Din, secretary, economic affair division and Eng. Hani Salem Sonbol, chief executive officer of ITFC.

The financing at the time ensured dollars were available for the state buyer to use for payment at some of its international purchasing tenders.

The facility has been made effective immediately and ready for utilization by Pakistan State Oil Company Ltd, Pak Arab Refinery Ltd and Pakistan LNG Ltd for import of oil and gas.

This syndicated Murabaha financing facility of $761.5 million is for a period of one year and is a part of umbrella Framework Agreement signed with ITFC in June 2021 for total envelop of $4.5 billion ($1.5 million annually) for a period of three-years.

“Originally, the ITFC had agreed to provide the financing of $300 million. However, due to growing energy needs of the country and enhanced confidence level of international financial institutions on economic reforms and recovery amid Covid-19 pandemic, the financing was over-subscribed by 2.5 times i.e. from US$ 300 million to from US$ 761.5 million.”

The statement said the financing facility will also be helpful in financing oil and gas import bill of the country and easing of pressure on foreign exchange reserves of the country.

The country’s oil import bill widened by over 97 percent to $4.59 billion in July-September quarter of current fiscal year due to rising global oil prices and rupee depreciation.

The continuing increase in import bill of oil is triggering trade deficit and may cause uneasiness on the external side for the government. Crude oil imports rose by 81.15pc in value and dipped 2.35pc in quantity during the months under review while those of liquefied natural gas increased by 144.02pc in value. Liquefied petroleum gas imports jumped by 53.95pc in value in July-Sept FY22.

The IMF viewed the country’s current account deficit to touch over $12 for the current fiscal year against the State Bank of Pakistan’s projection of $6.5 billion to $9 billion.

The statement said the ITFC and GOP have also agreed to continue their cooperation in future to mobilize financial resources to support Pakistan in its endeavours to achieve its economic growth targets through ITFC financing facility.