Pakistan seeks $6.7 billion Saudi oil facility at 1% interest for 15 years

Pakistan has requested a $6.7 billion concessional oil financing facility from Saudi Arabia at an interest rate of 1% for 15 years to limit the impact of higher global energy prices on its foreign exchange reserves.

The Express Tribune reported, citing a spokeswoman for the Ministry of Economic Affairs, that the proposal was under consideration by the two governments. The request includes a five-year grace period before repayments begin. 

The matter has also been discussed at the ministerial level.

The proposed arrangement would be significantly cheaper and longer-term than Saudi Arabia’s previous oil financing support. 

The last facility, signed in February 2025 and expired in April, provided $1.2 billion for imports of oil derivatives at an interest rate of 6%.

Finance Minister Muhammad Aurangzeb and Minister for Power Sardar Awais Leghari met Saudi Finance Minister Mohammed bin Abdullah Al-Jadaan on Sunday to discuss economic and energy cooperation. Both sides agreed to expand collaboration in the energy sector and strengthen bilateral economic ties.

Government officials said a Saudi financing deal could offset part of the additional import burden if oil prices remain elevated. The IMF has not included such a facility in its projected inflows for Pakistan for FY2026-27 and FY2027-28.

Pakistan imported petroleum products worth $14 billion during July-May of the previous fiscal year, broadly unchanged from the corresponding period a year earlier. Liquefied natural gas imports, however, were lower by $1.2 billion.

Sustained increases in oil prices could add pressure to reserves at a time when Pakistan’s exports stood at $30.1 billion in the last fiscal year.

Saudi Arabia has extended oil financing to Pakistan on one-year deferred payment terms since 2019. Through the Saudi Fund for Development, the Kingdom has provided around $6.7 billion for oil derivatives over this period.

The latest request comes as renewed fighting between Iran and the United States has pushed Brent crude prices up by about $15 per barrel, increasing energy and food security risks across the region.

The government is also exploring options to ease external debt repayments due over the next few years, including obligations linked to Chinese energy projects. Officials believe restructuring some of these payments could reduce the likelihood of Pakistan requiring another IMF programme after the current arrangement expires in September next year.

Saudi Arabia has also become one of Pakistan’s largest bilateral lenders after China. It recently provided a $3 billion short-term deposit through the Saudi Fund for Development to help Pakistan meet debt repayments to the United Arab Emirates.

Saudi cash deposits with Pakistan had reached $8 billion by early July, while the Kingdom has continued to provide financing assurances to the IMF.

Saudi Arabia was also Pakistan’s largest source of workers’ remittances in the last fiscal year, with inflows of $9.8 billion, accounting for 24% of the total.