Saudi Arabia cuts oil supply to Pakistan due to late payments

Pakistan has not received deferred oil from Saudi Arabia since May, as an agreement signed between the two close allies for the supply of fuel worth $ 3.2 billion under the agreement expired two months ago. The $ 3.2 billion Saudi oil facility was part of Saudi Arabia’s $ 6.2 billion package announced in November 2018 to ease Pakistan’s external sector woes, the Express Tribune reported.

The deal expired in May and the finance division is making efforts to renovate the facility, oil division spokesman Sajid Qazi was quoted as saying by the newspaper. Pakistan is awaiting a response from the Saudi government on its request to further expand the facilities, he added.

The event comes at a time when Pakistan faces a challenging situation, as its IMF program has also been technically suspended for the past five months. The repayment of Saudi loans and the expiration of the oil line could affect the central bank’s official reserves, which are built simply by taking loans, the newspaper said.

Budget estimates suggested that the government expected to receive a minimum of $ 1 billion in oil in fiscal year 2020-21, which began in July. Pakistan has already repaid a $ 1 billion Saudi loan four months before its repayment period, the newspaper said.

Citing sources, he said that Pakistan could also repay the remaining $ 2 billion cash loan, subject to the availability of a similar facility from China. The deal on the $ 3 billion cash support and the $ 3.2 billion per year oil facility had the renewal provision for two more years.

Saudi Arabia had refinanced its $ 3 billion loan between November 2019 and January 2020. The International Monetary Fund (IMF) has called the refinancing of aid from Saudi Arabia, the United Arab Emirates (UAE) and China critical to the Pakistan’s debt sustainability. Pakistan’s payment of the $ 1 billion loan to Saudi Arabia after borrowing from China and the maturing of the oil facility underscores the difficult relations between the two Islamic nations, the report noted.

The Saudi oil facility that had been secured after hectic backdoor lobbying with the royal family remained underutilized in the last fiscal year. The $ 769 million deferred payment facility on the oil supply was used by the Saudi government, according to the oil division spokesman.

The Saudi facility faced roadblocks from the start. Initially, both countries had a plan for the facility to be operational as of January 2019, but it actually became operational as of July last year. The UAE had also announced a $ 6.2 billion package for Pakistan in December 2018, including a $ 3.2 billion oil facility. But later, the UAE reduced its financial assistance to $ 2 billion and also shelved the plan to award a $ 3.2 billion oil facility in deferred payments.

The oil credit facilities of the United Arab Emirates and Saudi Arabia were part of the $ 14.5 billion package agreed with three friendly countries, including China. After coming to power, the Imran Khan-led Tehreek-e-Insaf government of Pakistan was faced with the immediate challenge of filling a $ 12 billion hole, which the Pakistan Muslim League government and Nawaz had left behind due to a growing current account deficit, according to the report. .

Read also: The price of gold is trading near an all-time high; silver amounts to 75,120 rupees

Previous Greensill says he warned Credit Suisse weeks before the collapse
Next The COVID-19 coronavirus pandemic helps a $ 10 million loan repaid by Shake Shack. What about Potbelly?