Tuesday 8 April 2025
Pakistan Secures $1.2 Billion Oil Payment Deferral from Saudi Arabia
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In a major financial relief ahead of its upcoming review with the International Monetary Fund (IMF), Pakistan has signed an agreement with the Saudi Fund for Development (SFD) to defer by one year a $1.2 billion payment on its oil imports. is expected to help Islamabad bolster its foreign reserves and stabilize its economic position.
Pakistans state-run television, took place in the presence of a Saudi delegation led by SFD CEO Sultan Bin Abdul Rehman Al Marshad. Prime Minister Sharif expressed his appreciation for Saudi Arabias continued support, noting that the deferred payment facility would provide immediate fiscal relief to Pakistan. The agreement ensures that Pakistan will receive oil on deferred payment for one year, allowing it to manage its foreign exchange reserves more effectively.
The initiative is particularly significant as Pakistan prepares for the first review of its$7 billion IMF bailoutin March. Saudi Arabia has consistently played a crucial role in supporting Pakistans economy, and this latest arrangement adds to the kingdoms existing financial commitments.
The SFD has been an active partner in Pakistans development, financing 18 projects and programs worth more than $1 billion. In December 2024, the fund extended its $3 billion deposit with Pakistans central bank for another year to further support the countrys foreign exchange reserves. These measures highlight Saudi Arabias deep economic ties with Pakistan and its role as a key financial ally.
In addition to the oil payment deferral, the SFD will provide $41 million for a water supply scheme in northwest Pakistan. The project aims to improve access to clean drinking water for 150,000 people, reflecting Saudi Arabias broader commitment to Pakistans development beyond financial aid.
Pakistan faces a daunting$26 billion debt servicing obligationin the current fiscal year. In an effort to meet these obligations, the country recently secured a $1 billion loan from two Middle Eastern banks at an interest rate of 6-7%. The Saudi oil deferral agreement provides crucial breathing room as Islamabad continues to navigate its economic challenges.
Finance Minister Muhammad Aurangzeb, in a meeting with the SFD CEO, shared updates on Pakistans macroeconomic stability, highlighting improvements in key economic indicators. He expressed gratitude for Saudi Arabias long-standing financial assistance and emphasized the importance of continued investment and funding from the kingdom. Aurangzeb also referenced his recent meeting with Saudi Finance Minister Mohammed bin Abdullah Al-Jadaan in Davos, where he was invited to attend a high-level annual conference focused on the challenges and opportunities faced by emerging market economies.
The oil deferral agreement marks a crucial step in strengthening Pakistans economic resilience. By securing a stable supply of petroleum products while alleviating immediate fiscal pressures, the deal offers much-needed relief to the Pakistani economy.
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