ISLAMABAD, Feb 8: Saudi Arabia has declined to resume $2 billion special financing arrangement (SFA) Pakistan had sought for crude oil imports to reduce surging trade deficit, it is learnt.
A senior government official privy to the recent meetings of Saudi King Abdullah bin Abdul Aziz with Pakistani leadership told Dawn that the Saudi King had not entertained Pakistan’s request for Saudi oil facility. “The issue did come up (for
discussion), but the chapter stands closed now,” said the official.
President Musharraf had initially requested King Abdullah during his visit in December last to Saudi Arabia to restore the SFA to Pakistan to absorb continuously rising oil import bill.
The official said Pakistan imported about 110,000 barrels of crude oil per day from Saudi Arabia that translated into about $2 billion per annum. Pakistan wanted this import under the SFA to reduce mounting pressure on foreign exchange reserves.
Pakistan’s trade deficit has already increased by over 132 per cent to $5.6 billion during first six months of the current fiscal year compared with $2.4 billion of the same period last year.
The country’s oil import bill has also increased by over 62 per cent to $3.033 billion in the first six months of the year compared with $1.87 billion of last year. Crude oil imports have also increased by more than 75 per cent to $1.9 billion in the first six months of the current year compared with $1.06 billion of the same period last year.
Such an increase in oil import bill has taken place despite 13 per cent quantitative decline in petroleum products and just 12 per cent increase in crude quantities.
The country’s total crude oil requirement is about 240,000 barrels per day. Of this, around 177,000 barrels of oil is imported and the rest about 63,000 barrels per day is produced locally. Pakistan also imports around 45,000 barrels per day from Dubai, 15,000 barrels from Qatar and 6,000 barrels from Iran.
Saudi Arabia had started supplying oil to Pakistan at the rate of about $1 billion per year under the special financing arrangement commonly known as Saudi Oil Facility (SOF) in 1998, following US-led international nuclear sanctions against Pakistan.
Initially, the SFA was for two years, but extended for another year and then gradually reduced and finally discontinued in 2003. Since oil import is the second largest contributor to Pakistan’s overall import bill, the government wanted relief in oil related foreign exchange loss.
Oil import of $3.033 billion in July-December was just behind machinery imports of $3.496 billion. The country’s total foreign exchange reserves of around $12.5 billion are much less to cover $13.65 billion worth of six month’s imports— a benchmark the government used to take pride in the recent years.