Dar expects $2.4b Saudi oil on deferred payment annually

Finance Minister Ishaq Dar on Tuesday said Saudi Arabia might increase the amount of oil supply to Pakistan on deferred payments to $2.4 billion a year and was likely to double deposits in Pakistan to increase foreign exchange reserves.

In an interview to a private TV channel, Dar also revealed that China had committed to rollover all deposits closer to their refund dates – the promises that can calm down markets in Pakistan

He said, “I have discussed both things (financial help and oil facilities) with the Saudi finance minister, and there are positive vibes from there. They said they will support us.”

Pakistan’s total payments in the financial year 2022-23 stood around $21 billion and the government had already outlined a plan for paying off the country’s debts, Dar noted.

The finance minister also noted that the current account deficit was expected to decline from $7 to $8 billion when compared with the projections of $11 billion by June 30, 2023.

Saudi Arabia has already extended the term for $3 billion deposit to the State Bank of Pakistan (SBP) through Saudi Fund for Development (SFD).

Dar also said that Islamabad was looking at purchasing oil from Russia on a discounted rate and he had discussed the matter with officials from the US State Department back in October.

The US officials had told him that a G7 pricing committee was being set up for Russian oil products and that there would be a price cap, he added. “(They said) you shouldn’t buy (oil) for above that, and I agreed.”

His statement comes as the EU and G-7 have ensured imposing a $60 per barrel price cap on the Russian oil as the West tries to reduce the income sources of Moscow in response to invasion of Ukraine.

IMF’s productive talks with Pakistan

Also on Tuesday, the International Monetary Fund (IMF) said discussions in the context of the 9th review of Pakistan’s Extended Arrangement under the Extended Fund Facility (EFF) had been productive and they were looking forward to continuing the dialogue.

“Discussions to date in the context of the 9th review have been productive,” IMF Resident Representative in Pakistan Esther Pérez Ruiz said.

“Discussions have enabled a revision to the macroeconomic outlook post floods as well as an in-depth evaluation of fiscal, monetary, exchange rate, and energy policies adopted since the completion of the combined seventh and eight reviews.”

“The IMF looks forward to continue the dialogue over policies that adequately address the humanitarian and rehabilitation needs from the floods, while also preserving fiscal and external sustainability given available financing.”

Its statement comes as Pakistan’s policymakers scramble to secure additional funding from different avenues with foreign exchange reserves held by its central bank dropping to their lowest level since January 2019, and barely enough to cover 1.5 months of imports.

The IMF review for the release of the next tranche of funding has been pending since September, leaving Pakistan in dire need of external financing.

No elections before October 2023

During the TV interview, Dar also ruled out the possibility of early elections, saying it was impossible – in a clear rebuke to the PTI’s demand and agitation-based politics.

Census were a must before general elections, he explained and added that holding polls without census was going to create a problem. A constitutional amendment would be required in case elections were to be held before census, Dar said.

No option but to impose new taxes

On Wednesday, Dar told a gathering in Islamabad that many countries had hiked rate their tax rate after the Covid pandemic and Pakistan too did not have any way out except increasing the tax to GDP ratio.

About the depreciating rupee, he said that smugglers and Hundi mafia (dollar black market) had taken the country as a hostage. There was a large-scale smuggling of US dollar and urea across the Pak-Afghan border at Chaman and the government had already launched an operation to stop the practice.

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