ISLAMABAD: Pakistan’s caretaker government is facing a multifaceted financial challenge as it seeks to secure dollar loans for the import of petroleum products.
As per reports, at the heart of this issue is the potential $3.3 billion syndicate financing deal with the Islamic Development Bank (IsDB), which may come at an interest rate exceeding 10 percent. These developments are unfolding against a backdrop of surging global petroleum prices and dollar scarcity.
With limited dollar reserves, the government is exploring the option of approaching the Kingdom of Saudi Arabia (KSA) to extend the deferred oil payment facility, which is set to mature in December 2023. Up to August 2023, KSA disbursed $600 million, with an additional $400 million anticipated by the year’s end. Pakistani oil companies consistently purchase $100 million worth of crude oil monthly, with invoices sent to Saudi authorities, who subsequently transfer funds to the Government of Pakistan.
The Ministry of Finance has also consulted with leaders in the domestic oil industry, who have recommended pursuing the IsDB’s $3.3 billion syndicate loans from 2023 to 2025. The reason behind this recommendation is that IsDB’s terms may be more favorable compared to the prevailing interest rates in both domestic and international markets.
Out of the total $3.6 billion financing allocated by IsDB’s International Trade and Finance Cooperation (ITFC), $300 million came directly from IsDB and the remaining $3.3 billion was intended to be arranged through syndicate financing from international banks. However, it appears that commercial banks are showing greater interest in investing in international bonds rather than contributing funds to syndicate financing.
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