Pakistan will start utilising the Saudi oil facility on deferred payments from March, Finance Minister Shaukat Tarin told the Senate on Friday, reported Radio Pakistan.
The development comes after Pakistan and Saudi Arabia agreed to operationalise the Saudi oil facility of $1.2 billion at the earliest.
The Financing Agreement worth $1.2 billion for import for petroleum products was signed on 29th November 2021 between the Saudi Fund for Development (SFD) and Economic Affairs Division (EAD), Pakistan.
As per the Financing Agreement, the SFD will extend financing facility up to $100 million per month for one year for the purchase of petroleum products on a deferred payment basis.
Tarin told the house during question hour Pakistan received $3 billion from Saudi Arabia in the month of December 2021 for a period of one year at 4% interest rate.
"The 4% interest rate is not bad if we take into account the interest rate environment across the world," said Tarin, adding that, if needed, Pakistan will request for extension in the loan.
Last year, the Saudi Fund for Development (SFD) announced the issuance of the Royal Directive to deposit an amount worth $3 billion into the central bank of Pakistan “to help the Pakistani government support its foreign currency reserves and support it in facing the impacts of the coronavirus pandemic”.
In addition, the SFD said that the royal directive was also issued to finance the oil derivatives trade with a total amount of $1.2 billion throughout the year.
Meanwhile, Tarin told the house that the country’s exports and remittances are increasing. He said the government has taken a number of steps to curb imports, adding that the trade deficit reduced by $1.5 billion in January.
On the rising import bill, the federal minister said that the rise in commodity prices internationally has led to an increase in imports. Oil prices have jumped above $90 per barrel, on account of rising escalation between Russia and Ukraine, creating concern for oil-importing countries like Pakistan.
On Friday, however, oil prices eased as hot U.S. inflation fanned worries about aggressive interest rate hikes and investors await the outcome of U.S.-Iran talks that could lead to increased global crude supply.
Brent crude futures fell 58 cents, or 0.6%, to $90.83 a barrel, while U.S. West Texas Intermediate crude declined 45 cents, or 0.5%, to $89.43 a barrel.
Meanwhile, the finance minister added that the foreign exchange reserves of State Bank of Pakistan (SBP) have increased over the last one year, a development that would help reduce pressure on the rupee.
The statement comes as foreign exchange reserves held by the State Bank of Pakistan (SBP) increased a massive $1.61 billion on a weekly basis, clocking in at $17.34 billion, showed data released by the central bank on Thursday.
On the other hand, the finance minister said that the government has tried not to pass on the full burden of the international increase in petroleum products. “We have reduced the sales tax and Petroleum Development Levy on petroleum products to provide relief to the masses,” said Tarin.
Responding to a supplementary query on the Financial Action Task Force (FATF), Tarin told the house that Pakistan has met 27 out of 28 conditions of the FATF. “We have fulfilled our targets and hoped the country will come out of the grey list in the next review meeting of the FATF,” he said.