Pakistan secures $ 4.5 billion facility for oil and LNG imports – Journal
ISLAMABAD: Pakistan secured a trade finance facility worth $ 4.5 billion over three years from the Jeddah-based Islamic Trade Finance Corporation (ITFC) to cover the costs of importing crude , petroleum products and liquefied natural gas (LNG).
A formal framework funding agreement on the deal will be signed early next week here, informed sources said. Dawn. The funds would be used as part of the annual fundraising plan of approximately $ 1.5 billion each. This trade finance agreement is in addition to some $ 531 million already signed by the Ministry of Economic Affairs with the Saudi Fund for Development (SFD) to finance the Mohmand dam project, a few more coal-based projects. of a few hydroelectric projects, including two in Azad Kashmir.
ITFC funding would be used over three years (2021-23) by Pak-Arab Refinery Ltd (Parco), Pakistan State Oil (PSO) and Pakistan LNG Ltd (PLL) for the import of crude oil, petroleum products and LNG and help increase the country’s foreign exchange reserves and provide resources to meet the oil import bill.
Pakistan’s oil import bill amounted to around $ 10 billion in the first 11 months of the current fiscal year, but has increased in recent months due to the upward trend in international oil prices . In the first 11 months, Pakistan imported about $ 2.5 billion each in LNG and crude oil, in addition to $ 4.5 billion in refined petroleum products.
ITFC is a member of the Islamic Development Bank Group and provides trade finance to member countries after raising funds from financial institutions in the Middle East. The sources said Pakistan signed a $ 1.1 billion trade finance facility for the current year last year, but could not be fully utilized due to the drop. international oil prices, declining demand in Pakistan, and refineries’ limitations on using Arab crude.
The sources said that the cost of financing the next financing facility would be lower than the existing one given the substantial excess liquidity of banks in the UAE and Saudi Arabia due to limited business activities following the wave of Covid-19 in progress. The existing facility provided for 2.3 pc plus the interbank offered rate in London (Libor).
The source said the two sides could also cover agricultural products, including DAP fertilizers, in addition to the existing pipeline of crude, petroleum products and liquefied natural gas. The sources said ITFC also committed in April 2018 to a similar line of funding for Pakistan for 2018-20, but usage ultimately could not exceed $ 3 billion as private refineries were not able to import crude as part of the installation as it was mainly limited to Parco and some. PSO scope.
Prior to 2018, ITFC funding was only available for the Pak-Arab refinery, which was extended to Pakistan State Oil in 2018. Last year, PLL was also included for the first time in the agreement. . ITFC had a limited portfolio of around $ 1 billion in equity and normally arranged by other private financial institutions. Some of the other major beneficiaries of the ITFC Trade Facility have been Indonesia, Egypt and Bangladesh.
The installation should help ease the bill for oil and gas imports and ease the pressure on foreign exchange reserves. Under the facility, funds do not flow into Pakistan’s account but ease pressure on foreign exchange reserves. These funds would be used to finance letters of credit for imports of petroleum and LNG by PSO, Parco and PLL.
Posted in Dawn, June 25, 2021