ISLAMABAD: The International Islamic Trade Finance Corporation (ITFC), a subsidiary of the Islamic Development Bank, and Pakistan on Wednesday signed an agreement under which the former would make available $761.5 million of syndicated loan for commodity financing, particularly oil and gas.

A financing agreement was formally signed by ITFC’s Chief Executive Officer Eng. Hani Salem Sonbol and Mian Asad Hayaud Din, Secretary Ministry of Economic Affairs (MEA) for their respective sides. The financing would be used for import of crude oil, refined petroleum products and LNG etc, an announcement said.

The facility has been made effective immediately and ready for utilisation by Pakistan State Oil Company Ltd (PSO), Pak Arab Refinery Ltd (Parco) and Pakistan LNG Ltd (PLL) for import of oil and gas.

This Syndicated Murabaha Financing facility 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 $4.5bn ($1.5m annually) for a period of three years.

The facility will be helpful in financing oil and gas import bill and ease pressure on foreign exchange reserves. ITFC had so far arranged $7bn for import of oil and LNG from 2008 to 2021.

The $4.5bn financing signed by two sides in June this year is to be utilised by PSO, Parco and PLL for import of crude oil, refined petroleum products and LNG during the years 2021-2023.

Within the context of its trade integrated solutions approach, the framework agreement also covered ITFC’s support for trade related technical assistance projects in Pakistan, which will be selected jointly by both parties according to the national economic priorities and development plan of Pakistan.

The agreement also requires identification of other areas of cooperation at country and regional levels and to enhance and promote trade, trade capacities of relevant state authorities and financial institutions and trade cooperation in the country.

The ITFC had also committed in April 2018 a similar financing line for Pakistan for 2018-2020 term but utilisation finally could not cross $3bn as private refineries were unable to import crude under the facility which mostly limited to Parco and to some extent to PSO.

Pakistan’s oil import bill was $11.4bn last fiscal year but has been rising in recent months because of increasing trend in the international oil prices.

Pakistan had last year signed a $1.1bn trade financing facility for the current year which could not be fully utilised due to lower oil international oil prices, depressed demand in Pakistan and limitations of the refineries in availing Arabian crude.

Published in Dawn, November 11th, 2021