Pakistan’s agreement with IDB

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Pakistan and the Islamic Development Bank (IDB) recently signed a $4.5 billion framework agreement for a commercial loan to finance oil and gas imports amidst merely 55% consumption of a similar three-year facility. Therefore, According to Ministry of Economic Affairs International Islamic Trade Finance Corporation signed the three-year framework contract for a collective amount of $4.5 billion with Pakistan in order to deliver funding for the import of necessary supplies such as crude oil, refined petroleum products, LNG and urea.  ITFC is the financing arm of the IDB for trade undertakings. This financing will benefit Pakistan to encounter energy necessities for the period 2021 to 2023. It will also permit the country to finance vibrant imports of crude oil and refined petroleum products. Under the authority framework contract, separate commercial agreements will also be signed that will regulate the precise interest rate. Ministry of Economic Affairs further revealed that the government could not take full use of the 2018-2020 like facility. Only $2.5 billion or 55% could be utilized against the $4.5 billion facility. The government could use on an average $833 million as against the annual financing cover of $1.5 billion. The ministry further said that the Covid-19 eruption and low oil prices were the reasons for the absence of consumption of the facility. According to State bank of Pakistan, Pakistan imported $8.5 billion worth of petroleum products including gas during the 11-month period (July-May) of current fiscal year. Last week, the government also announced a Saudi oil facility of $1.5 billion per annum on deferred payments, which was half the amount that Saudi Arabia had given in November 2018 under a three-year agreement. However, the three-year facility was prematurely terminated within the first year. Payments against oil imports are stable overseas, which takes off the stress from the rupee in the inter-bank market. The rupee has also come under burden in recent days and is being traded around Rs158 to a dollar.

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