ISLAMABAD: Saudi Arabia will activate a deferred payment facility for oil imports to Pakistan starting July 1, Pakistan’s top finance official said on Wednesday, a move that will see Islamabad receive $3.2 billion per year for three years.
The facility is badly needed at a time when Pakistan’s rupee reached a new record low this week, selling at 153 against the dollar in the interbank market on Monday to continue a slide that saw it lose more than 5 percent last week. The devaluation comes after Pakistan signed a $6 billion loan accord with the International Monetary Fund which has harsh reform conditions attached to it.
“1st July 2019 KSA is activating the deferred payment for petroleum products facility of $ 275mn per month amounting to $3.2 Billion per year for 3 years,” Dr. Abdul Hafeez Shaikh, the Pakistani prime minister’s adviser on finance, said in a Twitter post. “This will strengthen Pakistan’s Balance of Payments position.”
“Would like to Thank The Crown Prince of Saudi Arabia, His Highness Muhammad Bin Salman for his continuous support for the people of Pakistan,” Shaikh said.
Last year, Saudi Arabia agreed to give Pakistan $3 billion in foreign currency support for a year and a further loan in deferred payments for oil imports.
Pakistan’s central bank raised its key interest rate to 12.25% on Monday, warning that already soaring inflation risked further rises on the back of higher oil prices and reforms required for the new IMF bailout.
The 150 basis points increase follows a preliminary agreement last week with the IMF for a $6 billion loan that is expected to come with tough conditions, including raising more tax revenues and putting up gas and power prices. It was the eighth time the central bank has increased its main policy rate since the start of last year.
With economic growth set to slow to 2.9% this year from 5.2% last year, according to IMF forecasts, the rate rise adds to pressure on Prime Minister Imran Khan, who came to power last year facing a balance of payments crisis that has now forced his government to turn to the IMF.
Higher prices for basic essentials including food and energy has already stirred public anger but the central bank suggested there was little prospect of any immediate improvement.