Pakistan seeks USD 6.7 billion Saudi oil financing facility

Pakistan has sought a USD 6.7 billion concessional oil financing facility from Saudi Arabia over 15 years as the government looks to reduce immediate external financing requirements, ease pressure on foreign exchange reserves and manage the cost of energy imports.

The proposal is part of Pakistan’s efforts to secure longer-term financial support from Riyadh amid uncertainty in the Middle East and fluctuations in international oil prices. The proposed facility would provide financing for oil imports on favourable terms, allowing Pakistan to manage foreign currency payments over a longer period.

The arrangement has not been finalised, and the final financing terms will depend on negotiations between the two countries.

Pakistan seeks longer-term oil financing

Pakistan has relied on Saudi oil financing on deferred-payment terms since 2019. Under these arrangements, the country can import petroleum products and settle payments later, helping manage short-term foreign exchange requirements.

The most recent facility, worth USD 1.2 billion, was signed in February 2025 and expired in April 2026. Pakistan is now seeking to revive the arrangement while pursuing a broader financing facility spread over 15 years.

The earlier proposal for the USD 6.7 billion facility included an interest rate of 1% and a five-year grace period before repayments begin. These terms were reported during initial discussions, although the final conditions of any agreement remain subject to negotiations.

The proposed arrangement would provide longer-term support than the previous annual facilities, which were structured around shorter deferred-payment periods.

Saudi Arabia has provided approximately USD 6.7 billion in financing for Pakistan’s oil imports since 2019, according to earlier reports citing government officials. The proposed new arrangement would seek to extend this support through a longer repayment structure rather than relying solely on short-term renewals.

Rising oil costs add to pressure on foreign exchange reserves

Pakistan’s dependence on imported energy makes international oil prices a key factor in its external financing position. When crude oil and petroleum product prices rise, the country needs more foreign currency to pay for imports, potentially putting additional pressure on its foreign exchange reserves.

Pakistan imported petroleum products worth approximately USD 14 billion during July-May of the previous fiscal year, according to figures cited in reports on the proposed facility.

A sustained increase in global energy prices could raise the cost of meeting domestic fuel demand and increase the country’s external financing requirements. This is particularly important for Pakistan, which also needs foreign currency to service external debt, pay for other imports and maintain adequate reserves.

A deferred-payment oil facility could ease the timing of these payments by allowing Pakistan to settle some oil import costs over an agreed period instead of paying the full amount immediately.

The arrangement would not eliminate the cost of imported energy, but it could provide short-term relief to foreign currency cash flows and help the government manage external payment obligations.

IMF projections do not include proposed facility

The proposed Saudi oil financing has not been included in the International Monetary Fund’s projected inflows for Pakistan for fiscal years 2026-27 and 2027-28, according to the Fund’s third staff-level report.

This means the proposed facility should not yet be treated as a confirmed source of external financing in Pakistan’s near-term financial outlook. Its eventual impact will depend on whether Saudi Arabia approves the request, the final financing terms and how the arrangement is implemented.

Pakistan is also exploring options to manage upcoming external debt repayments, including obligations linked to Chinese energy projects, as part of broader efforts to reduce pressure on its external accounts.

Saudi Arabia remains a key financial partner

Saudi Arabia is among Pakistan’s most important bilateral financial partners, providing deposits, oil financing and other forms of economic assistance.

In July 2026, Saudi Arabia rolled over a USD 3 billion deposit held by Pakistan, helping the country manage its external financing requirements. Saudi cash deposits with Pakistan had reached USD 8 billion by early July, according to reports published at the time.

The Kingdom is also a major source of remittances sent by overseas Pakistanis. Remittances from Saudi Arabia totalled USD 9.8 billion in the previous fiscal year, accounting for approximately 24% of Pakistan’s total remittance inflows, according to figures cited in reports on the proposed oil facility.

Discussions between Pakistani and Saudi officials have also covered broader cooperation in energy, trade, investment and development projects. These engagements form part of Islamabad’s efforts to secure longer-term economic support and reduce its dependence on short-term external financing.

What the proposed facility could mean for Pakistan

If approved on favourable terms, the USD 6.7 billion facility could help Pakistan spread its oil import payments over a longer period and reduce immediate demand for foreign currency.

The potential benefit would depend on the volume and type of petroleum products covered, the timing of disbursements, the interest rate and the repayment schedule. A five-year grace period, if retained in the final agreement, would postpone the start of repayments and provide additional room to manage near-term financing needs.

However, the arrangement would not remove Pakistan’s exposure to international oil prices or its reliance on imported energy. The country would still need to meet its repayment obligations under the agreed terms.

For now, the USD 6.7 billion facility remains a proposal. Pakistan is seeking to turn its longstanding oil financing relationship with Saudi Arabia into a longer-term arrangement that could help manage energy import costs and external financing pressures.