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How Pakistan can best utilize the Saudi bailout package

 A much needed breather is provided by Kingdom of Saudi Arabia with a package total of $12 billion dollar.

Out of this $12 billion, $3 billion will be deposited in Pakistan for one year as cash help, while the remaining $9 billion dollar will include the year deferred payment oil supply.

The total oil imports for July 2017 to June 2018 financial year amounted to $12.99 billion amounting to 72% of total import bill.

The government had $20.177 billion foreign exchange reserves in SBP and commercial banks as of December 17, 2017 however these foreign exchange reserves fell by $4.264 billion to $15.913 billion as of May 18, 2018 in a short span of five months.

Now it is time for government to make the most of it and take care of it in the best possible way with prudence. This is something we can only expect from PM Imran Khan.

The deferred oil payment will ease the pressure on current account deficit, the government will try to reduce the oil imports by planning the major consumption of oil in power generation by switching it to gas the cheaper option.

The government of Pakistan has to utilize the good omen in the form of deferred payment package offered by Kingdom of Saudi Arabia.

The second good thing is the oil price has come down to $76 per barrel. The government has to meet the oil import bill for remaining 8 month of the financial year.

The first quarter import bill swell by 19.44% due to black gold price hike in international market. The oil import bill for 2018 financial year stood at $12.99 billion, which is expected to rise in FY 2019.

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The government have to revised petroleum prices or increase the import of LNG to keep the oil import and current account deficit in check.

The total current account deficit during financial year 2017-18 at $18 billion with almost $13 billion accounted for oil import.

Since oil imports will be made on deferred payment during financial year 2019, today on October 26, 2018 same request for deferred payment was made to UAE high level delegation also made by Pakistani government will definitely ease the pressure on foreign exchange reserves plus the PM Khan’s visit to China which is being eyed by both sides Pakistan and China is expected to bring in more than the expected good news.

If UAE accepts the deferred payment oil supplies request of Pakistan it will be lot easier for Pakistan, it might be possible with UAE acceptance and the outcome of PM’s visit to China goes as expected might eliminate IMF from equation in the short term very much on the cards.

The government of China through their representatives has given indications for quite a few big decisions and MOUs to be signed by both governments.

Now everyone is eyeing with anticipation, the PM’s forthcoming visit to China

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Disclaimer: The views expressed in this article are solely of the author and do not represent ARY policies or opinion.