Saudi Arabia is yet to renew an agreement worth $3.2 billion with Pakistan that allows oil supplies on deferred payments after that pact expired two months back and decision about its renewal remains pending with Riyadh.
According to media reports, the $3.2 billion Saudi oil facility was part of the $6.2-billion Saudi Arabian package announced in November 2018 to ease Pakistan’s external sector woes.
“Pakistan has already prematurely returned $1 billion Saudi loan – four months ahead of its repayment period. Pakistan could also return $2 billion remaining Saudi cash loan, subject to availability of similar facility from China. The agreement over $3 billion cash support and $3.2 billion oil facility per annum had the provision of renewal for two more years…Saudi Arabia has not provided the oil on deferred payments since May this year,” as per reports.
The budget estimates suggested that the Pakistan government was hoping to receive minimum $1 billion worth of oil in fiscal year 2020-21, which started from July.
In May 2019, Adviser to Prime Minister on Finance Dr Abdul Hafeez Shaikh had announced that “from July 1, 2019 KSA is activating the deferred payment for petroleum products facility of $275 million per month amounting to $3.2 billion per year for three years”.
The United Arab Emirates (UAE) had also announced a $6.2 billion package for Pakistan in December 2018, including $3.2 billion oil facility. However, the UAE later reduced its financial assistance to $2 billion and also shelved the plan to give $3.2 billion oil facility on deferred payments.
Under the agreement, the Pak-Arab Refinery Company (Parco) and the National Refinery Limited (NRL) were required to procure crude oil from Saudi Aramco Product Trading Company. Similarly, Pakistan State Oil (PSO) and Pakistan LNG Limited (PLL) were supposed to procure petroleum products and LNG from the Saudi company, respectively.
The two countries inked a financing agreement for the import of petroleum products, crude oil and LNG on February 17, 2019 during the Saudi crown prince’s Islamabad visit.