By Muhammad Luqman
Pakistan has announced that the $3.2 billion Saudi oil and gas facility on deferred payments would become operational from July 1 this year.
The announcement was made by Adviser to Prime Minister on Finance Dr Abdul Hafeez Shaikh through a tweet on Wednesday.
“From 1st July 2019 KSA is activating the deferred payment for petroleum products facility of $275 million per month amounting to $3.2 billion per year for 3 years,” tweeted Shaikh. “This will strengthen Pakistan’s balance of payments position,” he said. Hafeez Shaikh thanked the Crown Prince of Saudi Arabia Mohammed bin Salman for his continuous support for the people of Pakistan.
According to English newspaper, Daily Express Tribune, the two countries inked a financing agreement for the import of petroleum products, crude oil and LNG on February 17 during the Saudi crown prince’s Islamabad visit. The oil facility had been announced in November and it was initially expected to become operational from January 1st of this year.
However, due to various procedural and regulatory issues it will take seven months to make the facility operational by July 1, which coincides with the start of new fiscal year.
Riyadh did not want the Oil and Gas Regulatory Authority (OGRA) and the Hydrocarbon Development Institute of Pakistan (HDIP) to be involved in the testing of petroleum products to be imported from the Kingdom under the deferred payment facility, according to media reports.
Under the agreement, the Pak-Arab Refinery Company (Parco) and the National Refinery Limited (NRL) would procure crude oil from the Saudi Aramco Product Trading Company. Similarly, the Pakistan State Oil (PSO) and the Pakistan LNG Limited (PLL) would procure petroleum products and LNG from the Saudi company respectively.
Pakistan government led by Prime Minister Imran Khan hopes that the Saudi facility would help ease pressure on the balance of payments. The UAE had also indicated giving similar oil facility but later refused to provide oil on deferred payments.
However, the UAE has transferred $2 billion cash into the coffers of the State Bank of Pakistan (SBP) and another $1 billion are yet to come.
The government has already announced a staff level agreement with the International Monetary Fund (IMF) for $6 billion bailout package and is currently in process of implementing prior actions like increase in electricity prices, devaluation of rupee and hiking interest rates, according to newspaper, Express Tribune.
By Muhammad Luqman