ISLAMABAD: Pakistan is seeking a $6.7 billion concessional oil financing facility from Saudi Arabia to strengthen its energy security and ease pressure on foreign exchange reserves amid rising global oil prices triggered by renewed tensions in the Middle East.
According to official sources, the proposed facility is being negotiated at a 1% interest rate with a 15-year repayment period, including a five-year grace period. The request has been discussed at the ministerial level, while both governments continue consultations on the proposal.
A spokesperson for the Ministry of Economic Affairs confirmed that discussions on a Saudi oil facility under deferred payment arrangements are currently underway.
Since 2019, Saudi Arabia has been extending annual oil financing facilities to Pakistan on deferred payment terms. The latest agreement, signed in February 2025, provided $1.2 billion for the import of oil derivatives but expired in April this year. That facility, arranged through the Saudi Fund for Development (SFD), carried an interest rate of approximately 6%.
Overall, Saudi Arabia has provided Pakistan with nearly $6.7 billion in oil financing since 2019 through the SFD, helping the country manage its energy import bill and external financing needs.
The renewed conflict in the Middle East has increased concerns over global energy and food security, with Brent crude oil prices rising by nearly $15 per barrel following the latest escalation involving Iran and the United States.
Pakistan imported approximately $14 billion worth of petroleum products during the first eleven months of the last fiscal year. Although total imports remained largely unchanged from the previous year due to lower LNG purchases, higher international oil prices could significantly increase the country’s import bill and place additional pressure on its foreign exchange reserves.
The government is also exploring broader options to reduce external debt repayment obligations, including restructuring repayments related to Chinese energy projects. Officials believe easing these liabilities could reduce Pakistan’s dependence on a new International Monetary Fund (IMF) programme after the current arrangement expires in September 2027.
Strengthening economic cooperation with Saudi Arabia remains a key priority. During a recent meeting, Finance Minister Muhammad Aurangzeb and Power Minister Sardar Awais Leghari held talks with Saudi Finance Minister Mohammed bin Abdullah Al-Jadaan to discuss expanding bilateral economic and energy collaboration. Both sides reaffirmed their commitment to deepening strategic cooperation and enhancing investment in the energy sector.
Saudi Arabia also continues to play a vital role in supporting Pakistan’s economy through financial assistance. In addition to maintaining $8 billion in cash deposits with Pakistan, the Kingdom remains the country’s largest source of workers’ remittances, with overseas Pakistanis sending $9.8 billion during the last fiscal year—accounting for nearly 24% of total remittance inflows.
According to government officials, the proposed long-term oil financing arrangement would help cushion Pakistan against future increases in global fuel prices and improve external sector stability. The facility, however, has not yet been incorporated into the IMF’s medium-term financing projections, indicating that discussions between Islamabad and Riyadh are still ongoing.
Story by Shahbaz Rana
