Pakistan is pursuing dual strategies to address its energy financing needs, including securing syndicate financing from the Islamic Development Bank (IsDB) and making a renewed effort to convince Saudi Arabia to revive the Saudi Oil Facility (SOF), according to a news report.Â
The move follows concerns raised by the International Monetary Fund (IMF) about the availability of the Saudi Oil Facility.
The Saudi Fund for Development (SFD) recently extended the $3 billion deposit placed with the State Bank of Pakistan (SBP) for an additional year. Originally maturing on December 5, 2024, the deposit will now remain with Pakistan’s central bank until December 2025.
Despite multiple visits by Prime Minister Shehbaz Sharif to Saudi Arabia in recent months, the Saudi Oil Facility has not been finalized. Islamabad plans to make a formal request for the oil facility to cover 12 months starting January or February 2025.
At the same time, Pakistan has approached the IsDB’s International Islamic Trade Finance Corporation (ITFC) to increase its financing for oil procurement. The country is seeking to enhance the loan facility from $400 million to between $1 billion and $1.2 billion, depending on offered rates.
The ITFC syndicate financing is expected to be costly, with rates potentially reaching 9–10%, inclusive of charges and a markup tied to the Secured Overnight Financing Rate (SOFR), which currently stands at 4.59%. The SOFR reflects the cost of borrowing cash overnight using U.S. treasury securities as collateral.
Sources revealed that Pakistan recently availed an oversubscribed ITFC facility of $267 million, exceeding the initially expected installment of $200 million. With the latest formal request, the IsDB has been asked to significantly enhance the facility.
