Pakistan signs $761.5m agreement with ITFC to import petroleum products

Pakistan has a signed Murabaha Financing amounting to $761.5 million with the International Islamic Trade Finance Corporation (ITFC) for the import of petroleum products.

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

The Syndicated Murabaha Financing facility of $761.5 million 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 $4.5 billion.

Looming Energy Crisis

An energy crisis looms over Pakistan amid shortage of natural gas and rising oil price.

Last week, Prime Minister Imran Khan said that Pakistan is about to face a gas shortage in winters. The US has increased natural gas prices by 116%. On the other hand, Pakistan has not increased prices for household consumption, he claimed.

“The only price we had to increase was on the gas we were importing, we wanted to reduce prices but it’s not in our hands as these involve international buying,” the prime minister said.

$4.2b Saudi package

On October 27, Saudi Arabia announced a $4.2 billion aid package to support Pakistan. Riyadh would make a $3 billion deposit with the State Bank of Pakistan (SBP) and offer an oil deferred payments facility of $1.2bn per annum.

The money would be made available by the Saudi Fund for Development (SFD) under a “Royal Directive,” according to the Saudi Press Agency.

After the PTI came to power in 2018, Saudi Arabia deposited $3b into the SBP. It also opened an oil deferred payment facility worth $3.2b per for three years. However, the facility was withdrawn abruptly after nine months in May 2020.

Saudi Arabia also withdrew $1b from the $3b it had deposited with the SBP. Pakistan had to secure a $1b loan from China to repay the Saudis.