Saudi Ambassador Nawaf bin Said al-Maliki meets Economic Affairs Minister Omar Ayub Khan. Photo courtesy PID
Inked in November 2021, the deferred payment facility has been delayed to meet legal requirements
Pakistan and Saudi Arabia on Thursday agreed to operationalize “at the earliest” a deferred oil payment facility, worth $1.2 billion, that was inked in November 2021 but has been delayed to meet all necessary legal requirements.
According to a statement issued by the Press Information Department, the need to expedite the financing agreement was highlighted during a meeting in Islamabad between Saudi Ambassador Nawaf bin Said al-Maliki and Economic Affairs Minister Omar Ayub. Valued at $1.2 billion, the financing agreement inked between the Saudi Fund for Development and Pakistan’s Economic Affairs Division allows for the import of petroleum products against a deferred payment schedule.
Per the financing agreement, read the statement, the SFD would extend the financing facility up to $100 million/month for a year to allow Pakistan to purchase petroleum products on deferred payments.
In June 2021, Riyadh announced it would provide $4.2 billion in economic support to Pakistan, with a formal signing of the agreement occurring in November. The economic package entails Saudi Arabia depositing $3 billion with the State Bank of Pakistan (SBP) to shore up Islamabad’s foreign exchange reserves as well as $1.2 billion in deferred payments for oil supplies at an interest rate of 3.8 percent.
According to sources, the delay in operationalizing the agreement is linked to the finance ministry needing to provide sovereign guarantee on oil supplies, as well as the requirement of Pakistan State Oil, Pak-Arab Refinery Limited, the National Refinery Limited and Saudi Aramco inking a subordinate commercial purchase agreement. They said that all other procedures had now been completed and the agreement’s operationalization was awaiting Saudi Aramco’s signing of the agreement.
During their meeting, read the PID release, the Pakistani minister and Saudi ambassador discussed ongoing development projects and new initiatives. It said the Economic Affairs minister had appreciated Saudi support for priority development areas, adding that development projects in earthquake affected areas of Pakistan-administered Kashmir and Khyber Pakhtunkhwa were also discussed.
It stressed that the Saudi Fund for Development was providing financial assistance for various development projects related to energy, health, education and infrastructure. “Most recently, the SFD has committed to provide financing for Mohmand Dam Project, Shounter Hydropower Project, Jagran-IV Hydropower Project, Gravity Flow Water Scheme Mansehra, and Abbottabad- Muzaffarabad Road Project,” it added.
The press release said that the Saudi ambassador had assured Ayub of the Gulf kingdom’s continued support “at all levels” to further strengthen bilateral economic cooperation between the two brotherly countries. The Saudi ambassador also expressed his kingdom’s commitment to play a much stronger role in the socioeconomic development of Pakistan, it added.