Pakistan gets $4.5bn facility for oil, LNG imports

Published June 25, 2021
Pakistan’s oil import bill has amounted to about $10bn in first 11 months of the current fiscal year but has been rising in recent months because of increasing trend in the international oil prices. — AFP/File
Pakistan’s oil import bill has amounted to about $10bn in first 11 months of the current fiscal year but has been rising in recent months because of increasing trend in the international oil prices. — AFP/File

ISLAMABAD: Pakistan has secured a $4.5 billion worth of three-year trade financing facility from Jeddah-based Islamic Trade Finance Corporation (ITFC) to cover import cost of crude, petroleum products and liquefied natural gas (LNG).

A formal financing framework agreement on the arrangement would be signed early next week here, informed sources told Dawn. The funds would be utilised under Annual Financing Plan of roughly $1.5bn each. This trade financing arrangement is in addition to about $531 million already signed by Ministry of Economic Affairs with Saudi Fund for Development (SFD) for project financing of Mohmand dam, a couple of coal based projects besides a few hydropower projects including two in Azad Kashmir.

The ITFC’s financing would be utilised over three years (2021-23) by Pak-Arab Refinery Ltd (Parco), Pakistan State Oil (PSO) and Pakistan LNG Ltd (PLL) for import of crude oil, refined petroleum pro­ducts and LNG and help augment the country’s foreign currency reserves and provide resources to meet the oil import bill.

Pakistan’s oil import bill has amounted to about $10bn in first 11 months of the current fiscal year but has been rising in recent months because of increasing trend in the international oil prices. In first 11 months, Pakistan has imported about $2.5bn each worth of LNG and crude oil besides $4.5bn worth of refined petroleum products.

ITFC is a member of the Islamic Development Bank Group and provides trade financing to member countries after putting together funds from financial institutions in the Middle East. The sources said Pakistan had last year signed a $1.1bn trade financing facility for the current year but could not be fully utilised due to lower international oil prices, depressed demand in Pakistan and limitations of the refineries in availing Arabian Crude.

The sources said the financing cost for the upcoming financing facility would be lower than the existing one given substantial surplus liquidity of the banks in the United Arab Emirates and Saudi Arabia because of constrained business activities in the wake of ongoing Covid-19 wave. The existing facility envisaged 2.3pc plus London Inter-Bank Offered Rate (Libor).

The source said the two sides may cover the agricultural commodities as well including DAP fertiliser in addition to existing pipeline of crude, oil products and liquefied natural gas. The sources said the ITFC had also committed in April 2018 a similar financing line for Pakistan for 2018-20 but utilisation finally could not cross $3bn as private refineries were unable to import crude under the facility as it was mostly limited to Parco and to some extent PSO.

Before 2018, the ITFC’s financing was available only to Pak-Arab Refinery which was expanded to Pakistan State Oil in 2018. Last year, PLL was also included in the arrangement for the first time. ITFC had a limited portfolio of about a billion dollars of its own and normally arranged funds from other private financial institutions. Some of the other major recipients of the ITFC’s trade facility have been Indonesia, Egypt and Bangladesh.

The facility is expected to provide relief in oil and gas import bill and ease pressure on foreign exchange reserves. Under the facility, funds do not come into Pakistan’s account but ease pressure on foreign exchange reserves. These funds would be used for financing of letters of credit for oil and LNG imports by PSO, Parco and PLL.

Published in Dawn, June 25th, 2021

Opinion

Global governance
27 Oct 2021

Global governance

Wise countries design growth strategies as per their socioeconomic needs.
Too hot to handle
Updated 27 Oct 2021

Too hot to handle

Will Glasgow offer anything more than ‘blah blah blah’?
What a tangled web
Updated 26 Oct 2021

What a tangled web

So poorly kept is this secret about the opposition’s real hopes and no plans that even the government has figured it out.

Editorial

27 Oct 2021

Escalating prices

ONE question being asked by almost every Pakistani today is: for how long will we have to suffer food price ...
Another demolition
Updated 27 Oct 2021

Another demolition

THE closing act in the battle over the 15-storey Nasla Tower in Karachi has been set in motion. On Monday, the...
27 Oct 2021

A despicable custom

IT is a wonder that it took so long for the Federal Shariat Court to declare the practice of swara un-Islamic. To...
Perfect in every way
Updated 26 Oct 2021

Perfect in every way

GLORIOUS. Gratifying. Liberating. Pakistan’s thumping victory over India in their opening fixture of the T20 World...
26 Oct 2021

Balochistan CM’s exit

ON Sunday, Jam Kamal Khan Alyani’s name was added to the long list of chief ministers of Balochistan who ...
Minister’s odd logic
26 Oct 2021

Minister’s odd logic

THE government’s contradictions and confusion appear to have no end when it comes to dealing with the Tehreek-i-Labbaik Pakistan.