ISLAMABAD: The International Islamic Trade Finance Corporation loaned $386 million to Pakistan for import of liquefied natural gas (LNG) and oil as a part of the $4.5 billion trade financing facility agreed for the country two years ago, the ministry of economic affairs said on Monday.
The financing agreement signed between the International Islamic Trade Finance Corporation (ITFC), a subsidiary of Islamic Development Bank Group, and Pakistan for import of oil and LNG.
State-owned Pakistan State Oil Company (PSO), Pak Arab Refinery Limited (Parco) and Pakistan LNG Limited (PLL) will utilise the financing. The agreement was signed among the economic affairs division and ITFC and the representatives of PSO, Parco and PLL.
The financing agreement provides trade financing for a period of one year for import of oil and LNG. ITFC agreed to provide trade financing of $1.2 billion during the current year for import of oil and LNG by PSO, Parco and PLL.
The latest loan from the ITFC is a part of a framework agreement signed with ITFC in April 2018 for a total envelop of $4.5 billion over for a period of three years (2018-2020).
Pakistan received the fuel loans and oil payment deferment facilities from Saudi Arab in the past as it needed to save foreign exchange reserves to support its worsening balance of payment with reserves barely enough to cover less than three months of oil import payments.
While the current account deficit significantly narrowed in the recent past, the country still needs to curb foreign outflows to bolster the economy whose imports are almost two times its exports.
Saudi Arab’s withdrawal of oil deferment facility built up pressure on the balance of payment with one billion dollars of oil import payments made to the country.
“Signing of this financing facility will be helpful in financing oil and gas import bill of the country and easing of pressure on foreign exchange reserves of the country,” said the ministry of economic affairs. “This agreement also reflects confidence of international financial institutions in Pakistan’s economy and its future.”
Both sides hoped to work closely with each other for mobilisation of socioeconomic development of the country. The government is encouraging public and private sectors to utilise alternative fuels to meet the gap in energy demand and supply with private businesses allowed to exploit surplus re-gasification capacity of two RLNG terminals through LNG imports. Currently, Pakistan has two RLNG terminals with 600 million cubic feet per day of re-gasification capacity.
