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Pakistan wins Saudi deferrals on oil bill
By Farhan Bokhari in Islamabad
Published: July 11 2008
Saudi Arabia has agreed in principle to defer payments for crude oil sales to Pakistan expected to be worth approximately $5.9bn at present rates during Pakistans present July-June financial year.
This would provide a significant boost to the south Asian countrys economy just when it is coping with fast-mounting political and economic difficulties.
While Mr Qamar would not discuss the timespan for which payments on Saudi oil shipments would be deferred, an official from the petroleum ministry in Islamabad separately told the FT that the agreement involved deferring payments until at least June 2009 when the financial year ended.
Deferring payments would help Pakistan pass through a period when its finances are being squeezed. It is not clear if the deferred payments would be paid back.
One western diplomat familiar with Saudi ties to Pakistan said the Saudis in 1998 began supplying crude oil under a deferred payment plan after Pakistan carried out its maiden nuclear tests and came under international sanctions.
In that previous case, after three years of deferred payments, the Saudis practically wrote off the payments. It would be interesting to see if there is going to be a write-off in future of the deferred payments now under discussion, he said.
The Saudi gesture is expected at least partially to give back some confidence to investors in Pakistan. This had been lost this year owing to harsh economic conditions and growing internal political uncertainty over divisions between US-supported President Pervez Musharraf and newly elected politicians.
Mr Qamar said Saudi Arabias support would obviously help the situation a great deal.
Among the economic challenges, the rupee has fallen about 18 per cent since January while liquid foreign exchange reserves with Pakistans central bank and commercial banks together on Friday stood at about $11.12bn, significantly below a record high of $16.39bn in November last year.
The benchmark KSE-100 index on the Karachi Stock Exchange on Friday fell 0.66 per cent to about 11,700 points, about 25 per cent below its all-time high in April this year.
According to Pakistani officials, Saudi Arabia sells about 110,000 barrels of crude oil daily to Pakistan or about 40m barrels a year which at $147 a barrel comes to about $5.88bn. Pakistan imports a total of 202,000 b/d or approximately 73.7m barrels a year half of that from Saudi Arabia.
Pakistan consumes a total of 370,000 b/d or about 135m barrels a year. The gap between oil imports and consumption is filled with locally produced oil.
Mr Qamar said Pakistan was also keen to seek more Saudi investment in areas such as agriculture. The Saudis have recently been interested in exploring opportunities for such investments in their surrounding region to ensure continuing food supplies, amid mounting concerns over commodity pricing and supplies, according to western diplomats.
Pakistans government announced on Friday that Mr Qamar had discussed closer economic co-operation with Saudi Arabia during a meeting with Ali Awadh Asseri, the Saudi ambassador to Islamabad.
Western diplomats said news of the Saudi gesture once again highlighted Saudi Arabias interest in helping to stabilise Pakistans internal affairs.
http://www.ft.com
By Farhan Bokhari in Islamabad
Published: July 11 2008
Saudi Arabia has agreed in principle to defer payments for crude oil sales to Pakistan expected to be worth approximately $5.9bn at present rates during Pakistans present July-June financial year.
This would provide a significant boost to the south Asian countrys economy just when it is coping with fast-mounting political and economic difficulties.
While Mr Qamar would not discuss the timespan for which payments on Saudi oil shipments would be deferred, an official from the petroleum ministry in Islamabad separately told the FT that the agreement involved deferring payments until at least June 2009 when the financial year ended.
Deferring payments would help Pakistan pass through a period when its finances are being squeezed. It is not clear if the deferred payments would be paid back.
One western diplomat familiar with Saudi ties to Pakistan said the Saudis in 1998 began supplying crude oil under a deferred payment plan after Pakistan carried out its maiden nuclear tests and came under international sanctions.
In that previous case, after three years of deferred payments, the Saudis practically wrote off the payments. It would be interesting to see if there is going to be a write-off in future of the deferred payments now under discussion, he said.
The Saudi gesture is expected at least partially to give back some confidence to investors in Pakistan. This had been lost this year owing to harsh economic conditions and growing internal political uncertainty over divisions between US-supported President Pervez Musharraf and newly elected politicians.
Mr Qamar said Saudi Arabias support would obviously help the situation a great deal.
Among the economic challenges, the rupee has fallen about 18 per cent since January while liquid foreign exchange reserves with Pakistans central bank and commercial banks together on Friday stood at about $11.12bn, significantly below a record high of $16.39bn in November last year.
The benchmark KSE-100 index on the Karachi Stock Exchange on Friday fell 0.66 per cent to about 11,700 points, about 25 per cent below its all-time high in April this year.
According to Pakistani officials, Saudi Arabia sells about 110,000 barrels of crude oil daily to Pakistan or about 40m barrels a year which at $147 a barrel comes to about $5.88bn. Pakistan imports a total of 202,000 b/d or approximately 73.7m barrels a year half of that from Saudi Arabia.
Pakistan consumes a total of 370,000 b/d or about 135m barrels a year. The gap between oil imports and consumption is filled with locally produced oil.
Mr Qamar said Pakistan was also keen to seek more Saudi investment in areas such as agriculture. The Saudis have recently been interested in exploring opportunities for such investments in their surrounding region to ensure continuing food supplies, amid mounting concerns over commodity pricing and supplies, according to western diplomats.
Pakistans government announced on Friday that Mr Qamar had discussed closer economic co-operation with Saudi Arabia during a meeting with Ali Awadh Asseri, the Saudi ambassador to Islamabad.
Western diplomats said news of the Saudi gesture once again highlighted Saudi Arabias interest in helping to stabilise Pakistans internal affairs.
http://www.ft.com
