ISLAMABAD The import flow of crude and finished petroleum products to Pakistan has been hit hard by circular debt which has now crossed Rs192billion and a possible further downward revision of Pakistan`s credit rating in the coming days.

Sources in oil marketing companies (OMCs) told Dawn on Wednesday that in the last ten days alone, the circular debt - which the consumers owe to OMCs and the latter to refineries - has surged by Rs35billion.

The Pakistan State Oil (PSO) is facing problems in honouring its letters of credits (LCs). Banks are increasingly hesitant to confirm LCs to suppliers due to unstable and tight credit conditions in international banking and a possible further decline in Pakistan`s credit ranking.
   

By the end of last month, Moody had downgraded Pakistan`s credit rating from B2 to B3.
    

Almost all the refineries and oil marketing companies (OMCs) are facing problems in convincing banks to confirm their LCs while importing crude and finished products.
    

In the meanwhile, the debt issue has been haunting OMCs and refineries. At present, OMCs owe Rs77billion to refineries, while consumers (mostly institutions and organisations) have to pay Rs85billion to OMCs.
   

`It`s a catch 22 situation,` PSO`s official spokesman, Amir Abbasi told Dawn. The system, he said, needed reduction in debt load.
    

In response to a question, Mr Abbasi said that Rs82billion of PSO was stuck with power generation companies and government departments and institutions.

He said the state-run PSO imported 80 per cent of Pakistan`s total finished petroleum products including diesel, jet fuel and furnace oil and it needed cash to maintain the inflow of imports.