Economic Scenarios

Saudi Arabia grants Pakistan a one-year deferral of payments of 1.2 billion dollars

Pakistan has signed an agreement with the Saudi Development Fund to defer for one year the payment of $1.2 billion on the country's oil imports, the Pakistani prime minister's office said on Monday. “This project will strengthen Pakistan's economic resilience by ensuring a stable supply of petroleum products while reducing immediate fiscal burdens ,” Prime Minister Shehbaz Sharif's office said in welcoming the signing of the oil import financing.

At the same time, however, it also affirms the power of the Saudi monarchy over Pakistan, which now owes a lot to the financial compliance of Riyadh, which comes to have in its hands the financial stability of a country with 240 million inhabitants which is also a nuclear power.

Pakistan has been experiencing an economic crisis since 2022, characterized by high inflation, high debt, job cuts and a distressed fiscal position. At one point the country faced a severe shortage of foreign exchange reserves and risked defaulting on its debt obligations.

Pakistan's trade balance, which shows significant and continuous deficits

Three years ago, Pakistan set a target that cheap Russian crude would make up two-thirds of its oil imports, but failed to meet it due to foreign exchange shortages and restrictions on refineries and ports. The South Asian nation, plagued by liquidity problems, has become Russia's latest customer after it began offering Urals at discounted prices following sanctions imposed by the West.

Earlier, Pakistani Oil Minister Musadik Malik revealed that the country had paid for its first imports of Russian crude in Chinese currency . According to Malik, the purchase, the first government-to-government (G2G) between Pakistan and Russia, consisted of 100,000 tonnes of crude oil.

The decision to pay in Chinese currency instead of the traditional US dollar comes after Russia said it will no longer accept US currency as payment for its energy commodities , but will switch to Chinese and Emirati currencies. Furthermore, Russia has been cut off from US dollar-dominated global payment systems following heavy sanctions imposed by the war in Ukraine. The choice to pay in Yuan, however, poses the problem of a progressive devaluation of the Pakistani currency compared to the Chinese one.

Adding to the challenges, Pakistan pays significantly higher shipping rates for Russian crude, not only because of the greater distance it travels, but also because its ports are unable to handle the large ships departing from Russia. However, Pakistan prefers Russian crude to Saudi Arabian oil, because Saudi Arab Light crude is $10-11 per barrel more expensive for Pakistani refiners than Urals.


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The article Saudi Arabia gives Pakistan a one-year deferral of $1.2 billion in payments comes from Economic Scenarios .


This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/larabia-saudita-concede-al-pakistan-una-dilazione-di-un-anno-ai-pagamenti/ on Tue, 04 Feb 2025 11:19:14 +0000.