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KSA to revive deferred oil facility: Fawad - Inside Financial Markets

KSA to revive deferred oil facility: Fawad

– The News

Saudi Arabia has agreed in principle for resumption of oil facility on deferred payments to the tune of around $3 billion per annum basis for an extended period. The exact modalities will be finalised soon.

During the recent visit of Prime Minister Imran Khan to Saudi Arabia, Pakistan had made a fresh request for resumption of the Saudi Oil Facility (SOF) on deferred payments for an extended period.

The Saudi authorities have agreed in principle to grant their nod, but its exact details will be known when both sides will sign the formal deal. When Federal Minister for Information and Broadcasting Fawad Chaudhry was contacted and asked about the resumption of SOF for an extended period, he said, “Yes, it’s almost done”.

Amid the ongoing efforts to convince the IMF for providing a breathing space by allowing Islamabad to avoid burdening its masses by hiking power tariff and slapping increased taxes in the upcoming budget, Islamabad is vying for all available alternative plans to overcome its external account problems and resumption of the SOF can go a long way to get the desired results.

Pakistan’s budget makers for the next fiscal year 2021-22 will get a sigh of relief in the wake of agreement with the Kingdom of Saudi Arabia (KSA) for resumption of Saudi Oil Facility (SOF) from three to five years period.

Earlier, Saudi Arabia had provided a $6 billion financial package, including $3 billion deposits into the State Bank of Pakistan, and the remaining $3 billion for oil facility on deferred payment on per annum basis.

The previous oil facility from KSA was signed for three years during the visit of Saudi Crown Prince Mohammad Bin Salman to Pakistan. This facility was made operational from July 2019 with the understanding that the first-year bill would be paid on monthly basis and then second-year oil would be obtained on deferred payment. So, this whole facility would be ended in the fourth year upon the maturity of getting oil for the third year. It was assessed at that time that Pakistan would require $275 million oil facility on monthly basis from the KSA, so it accounted for $3.2 billion on per annum basis for three-year period.

Such facility was agreed upon for three years with the possibility of rollover of second and then third year. Both sides had agreed that this facility would be provided through the IDB’s Islamic Trade Finance Facility (ITFC). It is not known how much Pakistan had availed from the SOF in its first year, but then this facility got suspended. The IDB had also agreed to provide $1.5 billion oil facility on deferred payment, so in totality there was a provision of $4.7 billion oil on deferred payment.

It was an irony that out of $4.7 billion facility on deferred payment from both sides, Pakistan could hardly utilise around 30 per cent or $1.5 billion in the fiscal year 2019-20. Pakistan utilised over $700 million from the SOF and around $800 million from ITFC. The ITFC facility could not be utilised fully because of inefficiencies of both sides. The IDB had agreed to facilitate financing from the Gulf banks and because of mismatch in requirement, this facility could not be exhausted fully.

“The exchange rate variation, reduced oil prices and certain specific chemical used in crude oil made it hard for Islamabad to utilise the whole oil facility from both sides,” said a top official dealing with this issue. He added that the government had made efforts to finalise arrangements with private refineries but failed to do so because of various hitches. Now the government will have to create incentives for private refineries to utilise the SOF related crude oil, so that it could be utilised fully.

The government would have to convince the refineries to utilise this facility fully or it would remain a futile exercise to get this support from the brotherly country, the official concluded. 

Separately, Federal Information Minister Chaudhry Fawad Hussain said on Tuesday that Pakistan would dispatch aid to Palestine on humanitarian grounds to help it cope with the Covid-19 pandemic and the medical emergency situation there.

Briefing the media about the federal cabinet meeting, presided over by Prime Minister Imran Khan, and replying to questions, the minister said the cabinet started with deliberations on the latest situation with regard to Palestine. The cabinet congratulated the PM on his successful recent visit to Saudi Arabia.

He noted that Pakistan was the first Islamic country that adopted a very clear and strong stance on Palestine, and stuck to it even today. He noted that the foundation of Pakistan’s policy on Palestine was laid down by the Quaid-i-Azam and Prime Minister Imran Khan was its trustee. Fawad continued that Pakistan’s leadership and efforts for Palestine were being accepted by the entire Muslim Ummah, including Palestinian President Mahmud Abbas, their foreign minister and the country’s ambassador to Pakistan, who had thanked Pakistan for its support.

The minister pointed out that Turkish President Recep Tayyip Erdogan said what was in his heart for Palestine was on Imran Khan’s tongue. Tuesday morning, Fawad said, Foreign Minister Shah Mehmood Qureshi reached Turkey, from where he would leave for New York, along with some other foreign ministers, including Turkey, Indonesia, Sudan and Palestine to attend the General Assembly session on Palestinian situation and interact with dignitaries.

The minister said he briefed the forum about the information, shared by the government of Punjab, and the preliminary inquiry report regarding the Rawalpindi Ring Road (RRR) scandal and noted that it was only the PTI government that could do it, and only Prime Minister Imran Khan could order courageous measures in the wake of the scandal. He claimed there was no such precedence in the past, as the people and the media would cry, but the past governments of the PPP and the PMLN would remain unmoved.

He recalled that the proposal of the project was permitted for initial alignment in January 2018, whereas in 2019, the PM received an anonymous message of an engineer, who cautioned that the alignment had been changed, particularly at Sangjani point, where vehicles would be coming at the speed of 120km per hour and then suddenly the road was to be narrowed, reducing their speed to 90km per hour and he called it an engineering blunder, which would lead to frequent accidents.

To this, the PM ordered a preliminary inquiry and it was found that the road was being extended by 29km deep into Attock and hence it was to be made from Rawalpindi Ring Road to Attock Ring Road, and it was also established that alignment had been changed to the benefit of several housing societies. But the officials concerned denied that.

He strongly rejected the allegations of PMLN leaders that billions had been eaten up in the scandal, and claimed rather it was a scandal of saving billions, as owing to the road extension, additional Rs23 billion had to be paid for land acquisition. The minister added that Rs2.3 billion had been paid, which would be recovered.

“If you want to criticise the government, then first go through the report and note that billions were saved. And, there was no mention of Zulfi Bukhari or Ghulam Sarwar Khan in the preliminary inquiry report, but their names were mentioned on the social media. But the report mentioned name of Tauqir Shah, as a beneficiary, who’s a maternal relative of Zulfi Bukhari. However, added the minister Zulfi had nothing to do with it. But yet he had resigned on high moral ground to clear his name. Ghulam Sarwar Khan told the meeting that he would be responsible even if an inch of his land was proved benefiting from the project,” he noted. He said the Anti-Corruption Establishment (ACE) and other agencies concerned would comprehensively investigate the matter.

The Election Commission of Pakistan (ECP) report 2019-20, he explained, was tabled in the National Assembly. “Our stance is that electoral reforms are imperative for transparency in electoral process as well as the electronic voting machines (EVMs) for which an ordinance has already been promulgated. This week, the NA speaker and the Ministry of Parliamentary Affairs would display EVMs for political leaders and reporters, covering the Parliament. We also want to give voting right to overseas Pakistanis, as their contribution in terms of remittances is the backbone of our economy. However, the opposition’s position is unclear on giving rights to them,” he added.

He came down hard on the opposition for having inconsistent narratives on electoral reforms, and explained that the PPP and the PMLN had first claimed that the Result Transmission System (RTS) failed in the 2018 general elections. When asked in which constituency, they did not say anything. Then they claimed that Forms 46 were missing. “We asked in which constituency, again they didn’t say anything.” Then they claimed that there were videos showing people affixing fake stamps. They were asked in which constituency, they didn’t say anything.

The minister accused the opposition of having a non-serious narrative on electoral reforms and it proved that they did not believe in transparent and fair elections. He alleged that the PMLN had always won polls through rigging.

He said the government was also going to bring legislation that would make it mandatory for an elected candidate to take oath within six months, failing which his seat would be considered vacant. He referred to PMLN’s Ishaq Dar, who was elected a senator from Punjab in 2018, and he was yet to take oath.

Replying to questions, Fawad said Ghulam Sarwar Khan had welcomed the investigation and offered to appear before the investigators for the purpose. About Shehbaz Sharif, again going for relief from the courts, the minister said the media had its own concerns and the government too that why the cases against him were not reaching their logical conclusion. “We have no control over courts or NAB [National Accountability Bureau]. They are independent in their functioning. The case of money laundering of Rs7 billion by Shehbaz is quite clear, while it was quite obvious how Rs1.24 billion at that time were laundered in relation to Hudaibiya Paper Mills, which then landed in accounts of 48 family members of Sharifs. The PM wants all the corruption cases taken to their logical conclusion,” he added.

He decried how some media persons cried on the channels about the ailment of Nawaz Sharif and when he flew out, and was not returning home even now, they were not prepared to ask him to come back.

The minister welcomed good reports coming regarding Saudi Arabia-Turkey relations and Saudi Arabia and Iran. He said that a consolidated policy was being framed for overseas Pakistanis, particularly in relation to Saudi Arabia, as the prime minister had raised the matter during his recent visit for exempting Pakistanis, who were to join their employment there or were to rejoin their jobs after vacations back home.

Separately, Federal Minister for Information and Broadcasting Chaudhry Fawad Hussain said on Tuesday that Rawalpindi commissioner had confirmed the information in the preliminary probe about the involvement of the ex-commissioner and other officers in the Rawalpindi Ring Road (RRR) scandal.

“The matter should be referred to the agencies concerned for further investigation. So far no evidence has been found about any minister or adviser involved in the case,” he said in a series of tweets on the matter.

He noted that Prime Minister Imran Khan’s accountability policy was clear: all citizens were equal in the eyes of law, whether opposition leaders or cabinet members. “If there are allegations then there would be investigations and the principle of accountability will be applied, this was the change of the system that was promised,” he added.

“This is the change of the system. The government officials should be afraid of accountability. Even the most powerful people are not exempted from the law. In the matter of Ring Road, the Prime Minister was informed that the project was extended by 23-km for the benefit of housing societies. With this decision, the government had to pay Rs20 billion for the purchase of additional land. The chief minister was asked to investigate, the commissioner Rawalpindi was asked to look into the matter,” he noted.

Syed Zaki Hussain

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