KARACHI: Saudi Arabia has agreed to resume a deferred oil payment facility worth $1.5 billion annually for Pakistan, a top government official in Islamabad has said.

In 2018, Saudi Arabia agreed to give Pakistan $3 billion in foreign currency support for a year and a further loan worth up to $3 billion in deferred payments for oil imports to help stave off a current account crisis. The oil facility has been on hold since May 2020.

Last month, Information Minister Fawad Chaudry announced the kingdom had agreed in principle to help Pakistan by resuming the oil facility. The agreement follows Prime Minister Imran Khan’s visit to Riyadh in May.

“Saudi Arabia has announced the $1.5 billion oil facility,” Waqar Masood Khan, the prime minister’s special assistant on finance and revenue, told reporters in Islamabad on Monday.

Pakistan targets collecting Rs610 billion ($3.8 billion) in taxes from the petroleum sector during the next fiscal year, which will start on July 1.

“This facility will create easiness for us,” Khan said, speaking about the oil sector’s potential.

The Financial Times reported on June 20 that the oil facility would be resumed in July. In a post-budget speech earlier this month, finance minister Shaukat Tarin also said Pakistan and Saudi Arabia had agreed to resume the oil facility, but did not share further details.

Financial experts say the resumption of the facility will help Pakistan ease its external account position.

“The oil facility would support external account position of the country as it would stabilize oil imports in the wake of high oil prices,” Khurram Schehzad, chief executive of financial consulting firm Alpha Beta Core, told Arab News.

The Saudi oil facility will also partially ease the burden of oil imports as oil prices have increased on the international market from $50 to $72 per barrel.

“Because of the rising prices, Pakistan would have to pay an additional around $3 billion to $4 billion,” senior economist Muzamil Aslam said. “This facility would offset some of the imports with $1.5 billion deferred payment.”