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Saudi to extend oil loan to Pakistan, discussing dollar deposits

Published: Updated:

Saudi Arabia will extend an oil loan facility to Pakistan and is considering rolling over dollar deposits as the South Asian nation looks to rein in one of Asia’s highest inflation rates and stave off a current-account crisis.

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The Kingdom is discussing options including extending the term of a $3 billion deposit with the State Bank of Pakistan, the countries said in a joint statement Sunday after Prime Minister Shehbaz Sharif met Crown Prince Mohammed bin Salman.

Pakistan welcomed Saudi Arabia’s decision to extend the agreement to finance crude exports and oil derivatives, according to the statement, which didn’t offer details.

Sharif, who took office last month after a joint opposition ousted premier Imran Khan, faces the politically tough task of stopping Khan’s fuel subsidies and raising pump prices if he’s to get a loan from the International Monetary Fund.

Anti-inflation protests are already roiling parts of the region as the war in Ukraine stokes the costs of everything from crude oil to coal.

Saudi Arabia pledged $4.2 billion in assistance to Pakistan when Khan visited the kingdom in October.

That included a deposit of $3 billion with the State Bank of Pakistan to help shore up its reserves and a facility to finance oil derivatives trade worth $1.2 billion during the year.

Sharif recently rejected a proposal from his minister to raise local fuel costs, days after vowing discipline to unlock $3 billion pending from an IMF loan agreement that was suspended amid the political turmoil in Pakistan.

An IMF team will visit Pakistan after May 7 and hold talks on the issues around subsidies on petrol and electricity.

Pakistan has seen its foreign exchange reserves fall to less than two months of import cover after a delay in the IMF loan program. It is also resorting to power cuts as electricity plants face fuel and funding shortages.

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