The Ministry of Economic Affairs announced that The International Islamic Trade Finance Corporation (ITFC) signed a three-year framework agreement with Pakistan for a total amount of $4.5 billion for the financing of import of essential commodities such as crude oil, refined petroleum products, LNG and urea.
The agreement was signed virtually where Minister of Economic Affairs Omar Ayub Khan witnessed the signing between ITFC CEO Hani Salem Sonbol and Ministry of Economic Affairs outgoing Secretary Noor Ahmed. The financing available through this facility will be utilised by Pakistan State Oil (PSO), Pak-Arab Refinery Ltd (Parco) and Pakistan LNG Ltd (PLL) for import of crude oil, refined petroleum products and LNG during the years 2021-2023.
Minister for Economic Affairs @OmarAyubKhan witnessed signing of 3-Year Framework Agreement amounting to US$ 4.5 billion between GOP and ITFC for import of essential commodities such as crude oil, refined petroleum products, LNG and urea. pic.twitter.com/Nxt9ySxRXO
— Economic Affairs Division, Government of Pakistan (@eadgop) June 28, 2021
The framework agreement reflects the importance of longstanding cooperation between the ITFC and the government of Pakistan, said Sonbol.
“ITFC is continuously working closely with its member countries to meet their requirements by providing integrated solutions that include financing and capacity building tools that allow for maximizing the development impact of ITFC interventions.”
According to sources, the fresh facility has been acquired at an average rate of London Interbank Offered Rate plus 2.5% while the previous three-year facility had been drawn at Libor plus 2.5% to 2.75%.
However, the 2018-2020 facility could not be fully used by the government and only $2.5 billion or 55% could be utilized against the $4.5 billion facility. According to the State Bank of Pakistan, the country imported $8.5 billion worth of petroleum products including gas during the 11-month period (July-May) of current fiscal year for which the ministry blames the Covid-19 outbreak and low oil prices.
Separate commercial agreements will also be signed that will determine the exact interest rate under this newly signed oil deal. The umbrella framework is also said to cover ITFC’s support for trade-related technical assistance projects in Pakistan which both the parties will jointly select according to the national economic priorities and development plan of Pakistan, revealed the ministry.
The ministry further stated that the agreement would facilitate identification of other areas of cooperation at country and regional levels and bolster trade, trade capacities of relevant state authorities and financial institutions and trade cooperation in Pakistan.
Minister Omar Ayub Khan also thanked the ITFC for coming forward to support Pakistan ‘at a very challenging time’ so that it could meet the import requirement of oil and LNG and relieve pressure on cash reserves of the country.