Pakistan, KSA to finalize deferred oil agreement in January

Pakistan hopes to finalize agreement with Kingdom of Saudi Arabia to avail import of oil on deferred payment in January 2019, officials told Arab News. (REUTERS/photo)
Updated 30 December 2018

Pakistan, KSA to finalize deferred oil agreement in January

  • Islamabad will start importing oil on deferred payment from Riyadh from January, Dr. Farrukh Saleem
  • Pakistan expects to save around $4 billion in backdrop of international market slowdown

KARACHI: Pakistan hopes to finalize agreement with Kingdom of Saudi Arabia to avail import of oil on deferred payment in January 2019, officials told Arab News.

“The agreement with Saudi Arabia for import of oil on deferred payment will hopefully be signed in the month of January. The country will also start availing the facility in the same month,” Dr Farrukh Saleem, Government’s spokesman on Economy and Energy, said on Sunday.

The agreement, after finalization would be signed by the respective ministers of both the countries.  

Saudi Arabia had agreed to support Pakistan with $6 billion bailout package, comprising $3 billion cash deposit and $3 billion worth of import of oil on deferred payment. The Saudi Fund for Development (SFD) and State Bank of Pakistan (SBP) will play facilitative role in the payments for import of oil from the KSA.

According to the agreement, the Saudi Aramco will supply around 110,000 barrels per day crude oil to Pakistan’s state run Pak Arab Refinery and National Refinery for refining. 

Pakistan’s petroleum group imports including crude and Liquefied Natural Gas LNG stood at $13.26 billion during the last fiscal year FY 18 while the country has imported $6.8 billion worth of petroleum product during the first 5 months of current fiscal year FY 19, SBP data shows.

Pakistan’s economic managers hope that the country would benefit from the current price decline in the international market with the WTI futures trading at $45.33 whereas the global benchmark, Brent crude, trading at $53.21 per barrel, according to the Friday closing.

“We hope that the government will be able to save around $4 billion in the backdrop of current price decline in the international market,” Dr. Saleem said.

The oil prices have come down from an average high of $85 per barrels in the international market.

Pakistan is currently facing balance of payment imbalances of around $12 billion mainly due to rising imports and insufficient exports.

The oil facility being negotiated with the Saudi Arabia will help the country in supporting its balance of payment situation and foreign exchange reserves position.

Despite inflow of $2 billion from the Saudi Arabia and expected another $1 billion in January 2019, Pakistan’s foreign exchange reserves remain under pressure. “During the week ending December 21, 2018, SBP’s reserves decreased by $591 million to $7,457 million, due to external debt servicing and other official payments,” according to SBP.

The incumbent government led by Prime Minister Imran Khan who successfully secured the bailout package from Saudi Arabia during his two officials visit to the Kingdom is also seeking similar facility from the United Arab Emirates UAE.

The UAE has recently announced to deposit $3 billion in the account of Pakistan’s central bank. However, the officials say the talks with UAE for Saudi Arabia like facility of oil import on deferred payment are in progress.

Expected Saudi deferred oil facility will not be the first, Riyadh is going to offer to Islamabad, Pakistan had enjoyed the similar treatment in 1998 after the nuclear tests and country was under stern pressure.

OECD forecast sees global growth at decade low

Updated 17 min 27 sec ago

OECD forecast sees global growth at decade low

  • Governments failing to get to grips with challenges, outlook says

PARIS: The global economy is growing at the slowest pace since the financial crisis as governments leave it to central banks to revive investment, the OECD said on Thursday in an update of its forecasts.

The world economy is projected to grow by a decade-low 2.9 percent this year and next, the Organization for Economic Cooperation and Development said in its Economic Outlook, trimming its 2020 forecast from an estimate of 3 percent in September.

Offering meagre consolation, the Paris-based policy forum forecast growth would edge up to 3 percent in 2021, but only if a myriad of risks ranging from trade wars to an unexpectedly sharp Chinese slowdown is contained.

A bigger concern, however, is that governments are failing to get to grips with global challenges such as climate change, the digitalization of their economies and the crumbling of the multilateral order that emerged after the fall of Communism.

“It would be a policy mistake to consider these shifts as temporary factors that can be addressed with monetary or fiscal policy: they are structural,” OECD chief economist Laurence Boone wrote in the report.

Without clear policy direction on these issues, “uncertainty will continue to loom high, damaging growth prospects,” she added.

Among the major economies, US growth was forecast at 2.3 percent this year, trimmed from 2.4 percent in September as the fiscal impulse from a 2017 tax cut waned and amid weakness among US trading partners.

With the world’s biggest economy seen growing 2 percent in 2020 and 2021, the OECD said further interest rate cuts would be warranted only if growth turned weaker.

China, which is not an OECD member but is tracked by it, was forecast to grow marginally faster in 2019 than had been expected in September, with growth of 6.2 percent rather than 6.1 percent.

However, the OECD said that China would keep losing momentum, with growth of 5.7 percent expected in 2020 and 5.5 percent in 2021 in the face of trade tensions and a gradual rebalancing of activity away from exports to the domestic economy.

In the euro area, growth was seen at 1.2 percent in 2019 and 1.1 percent in 2020, up both years by 0.1 percentage point on the September forecast. It is seen at 1.2 percent in 2021.

The OECD warned that the relaunch of bond buying at the European Central Bank would have a limited impact if euro area countries did not boost investment.

The outlook for Britain improved marginally from September as the prospect of a no-deal exit from the EU recedes.

British growth was upgraded to 1.2 percent this year from 1 percent previously and was seen at 1 percent in 2020.