ISLAMABAD: In what will give stability to the rupee-dollar exchange rate in the interbank market that has largely remained under pressure, the Islamic Development Bank (IDB) has activated its three-year $4.5-billion oil financing facility for Pakistan.
A member of the IDB Group, the International Islamic Trade Finance Corporation (ITFC) rolled over a loan of $100 million this week, said sources in the Ministry of Finance and Economic Affairs. The Economic Affairs Division (EAD) secretary signed the Letter of Amendment for the credit facility, reported The Express Tribune.
The move comes amid unconfirmed reports that Saudi Arabia may soon come to Pakistan’s rescue which is facing a severe monetary crisis.
The new PTI-led government is expected to get assistance to the tune of $2 billion from Saudi Arabia, as the last Pakistan Muslim League-Nawaz (PML-N) government had sought $5 billion in aid from Riyadh, but failed to succeed.
Saudi Arabia’s ambassador to Pakistan met with PTI Chairman Imran Khan at the latter’s residence on Friday. China, which had also refused to bail out the PML-N government, has now agreed to give $2 billion in financial assistance. Of this, over $1 billion has been disbursed this week.
The financing from ITFC will help Pakistan meet energy requirements for the period from 2018 to 2020. It will allow the country to finance vital imports of crude oil and refined petroleum products.
The $100-million rollover is part of the $4.5-billion assistance, a three-year framework agreement signed by Pakistan and the IDB in April this year.
Initially, the IDB had committed $3.2 billion, which was almost similar to the previous facility that ended in 2017. However, on Pakistan’s request its size was enhanced to $4.5 billion for the 2018-20 period, said a source in the finance ministry.
The fresh facility has been obtained at the London Interbank Offered Rate plus 2.27 per cent, which is 48 basis points cheaper than the previous facility, said the sources.
During the last financial year 2017-18, the ITFC had extended four facilities for crude oil imports valuing at $870 million, according to EAD statistics.
Pak Arab Refinery Limited and Pakistan State Oil will utilise the $4.5-billion credit facility. Crude oil import financing requirements are met through the inter-bank market and the ITFC facility will ease the pressure on the inter-bank market.
