ISLAMABAD  -    Pakistan and International Islamic Trade Finance Corporation (ITFC) have signed a trade financing facility amounting to $551 million that would ease the pressure on country’s foreign exchange reserves slightly.

The ITFC, a subsidiary of Islamic Development Bank (IsDB) Group, would provide the loan to Pakistan for import of oil and LNG. This facility will be utilized by Pakistan State Oil Company Limited, Pak Arab Refinery Limited (PARCO) and Pakistan LNG Limited (PLL). The financing agreement provides trade financing amounting to $551 million for a period of one year for import of oil and LNG. ITFC has agreed to provide trade financing of $1.3 billion during the year 2019 for import of oil and LNG by PSO, PARCO and Pakistan LNG Limited. It may be recalled that this facility is a part of framework agreement signed with ITFC in April 2018 for a total envelop of $4.5 billion over for a period of three years (2018-2020).

The agreement was signed among the Economic Affairs Division and ITFC and the representatives of PSO, PARCO and Pakistan LNG Limited. Dr Abdul Hafeez Shaikh, Adviser to the Prime Minister on Finance, Revenue and Economic Affairs witnessed the signing of trade financing facility. This agreement also reflects confidence of international financial institutions in Pakistan’s economy and its future. Dr. Abdul Hafeez Shaikh, Adviser to the Prime Minister on Finance, Revenue & Economic Affairs thanked and appreciated ITFC support for Pakistan.

An official of the ministry of finance informed that government is continuing to pursue a multi-pronged strategy to ensure continued stability in the country’s balance of payment position. The strategy includes attracting more foreign direct investment, sale of assets and bilateral and multilateral flows. He further stated that Pakistan Banao Certificate has also been launched, a first-ever retail offering to Pakistanis abroad. The government is also working on diversifying its investor base through issuance of Panda Bond.

Signing of the financing facility with ITFC will be helpful in financing oil and gas import bill of the country and easing of pressure on foreign exchange reserves of the country. Pakistan’s foreign exchange reserves have tumbled by over one billion dollars in last week mainly due to the repayment against Pakistan Sovereign Bond. Pakistan’s foreign exchange reserves have declined by $1.03 billion to $16.2 billion during previous week. The reserves held by the State Bank of Pakistan (SBP) stood at $9.24 billion where reserves of the commercial banks are $6.95 billion.

The country’s foreign exchange reserves held by the central bank had recently gone to $10.7 billion after getting loans from Saudi Arabia, United Arab Emirates (UAE) and China.  The reserves are coming under pressure in next few months due to heavy repayments. The incumbent government, after making hectic efforts, succeeded in arranging financing to avert the balance of payment crisis. Prime Minister Imran Khan had visited friendly countries like China, UAE and Saudi Arabia for requesting to provide loans. Pakistan had already received three billion dollars from Saudi Arabia. Meanwhile, the deferred oil payment facility is also in the pipeline, which would reduce the pressure on the imports of the country. The UAE had so far deposited $2 billion in SBP’s account since January 2019. China has deposited $2.1 billion (RMB 15 billion) in State Bank of Pakistan (SBP)’s account to jack up the foreign currency reserves.