Pakistan has averted an immediate financial strain by securing a one-year deferral on a $1.2 billion payment for oil imports from the Saudi Fund for Development. This agreement comes amidst Pakistan's ongoing economic crisis, characterized by high inflation, debt, and a dwindling foreign exchange reserve. While Pakistan had previously aimed to import two-thirds of its oil from Russia at discounted rates, logistical and financial constraints have hampered this goal.
Pakistan has signed an agreement with the Saudi Fund for Development to defer a $1.2 billion payment on the country's oil imports by one year, the office of Pakistan's prime minister said on Monday. This project will strengthen Pakistan's economic resilience by securing a stable supply of petroleum products while reducing immediate fiscal burdens,' Prime Minister Shehbaz Sharif’s office said when welcoming the signing of the oil import financing facility.
Pakistan has been grappling with an economic crisis since 2022, marked by high inflation, soaring debt levels, job losses, and a precarious fiscal position. At one point, the country faced a severe shortage of foreign exchange reserves and teetered on the brink of defaulting on its debt obligations.Three years ago, Pakistan set its sights on securing cheap Russian crude oil to constitute two-thirds of its imports, but this ambition has remained unfulfilled due to a shortage of foreign currency, limitations at its refineries, and constraints at its ports. The cash-strapped South Asian nation emerged as Russia's latest oil customer after Russia began offering discounted Urals crude following sanctions imposed by the West. Previously, Pakistan's petroleum minister Musadik Malik revealed that the country had paid for its initial imports of Russian crude in Chinese currency. According to Malik, the purchase, the first government-to-government (G2G) deal between Pakistan and Russia, involved 100,000 tonnes of crude.The decision to utilize Chinese currency instead of the traditional US dollar for this transaction followed Russia's announcement that it would no longer accept the American currency as payment for its energy commodities. Instead, Russia opted to switch to Chinese and Emirati currencies. Furthermore, Russia was severed from the US dollar-dominated global payment systems following sweeping sanctions imposed in the wake of the Ukraine war. Compounding the challenges, Pakistan incurs significantly higher transportation fees for Russian crude due to the increased distance traveled, as well as its ports' inability to accommodate the large vessels departing Russia. Despite these hurdles, Pakistan still favors Russian crude over oil from Saudi Arabia because Saudi Arab Light crude is $10 to $11 per barrel more expensive for Pakistani refiners compared to Urals
PAKISTAN ECONOMICS OIL IMPORTS SAUDI FUND FOR DEVELOPMENT ECONOMIC CRISIS RUSSIAN CRUDE FOREIGN EXCHANGE RESERVES ENERGY SECURITY
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