$6.7b oil facility sought from Saudi

15-year loan at 1% interest from SFD; total Saudi cash deposits up to $8b

Pakistan is seeking a $6.7 billion concessional oil financing facility from Saudi Arabia with a 15-year repayment period to strengthen energy security as escalating Middle East tensions threaten to keep global oil prices elevated and increase pressure on the country's foreign exchange reserves.

A spokesperson for the Ministry of Economic Affairs confirmed that discussions are underway regarding a Saudi oil facility on deferred payment terms.

According to officials, Pakistan has requested the financing at a 1% interest rate, along with a five year grace period before repayments begin. The proposal has been discussed at the ministerial level and remains under consideration by both governments.

Since 2019, Saudi Arabia has supported Pakistan through annual deferred oil payment arrangements. The most recent $1.2 billion facility, signed in February 2025 through the Saudi Fund for Development (SFD), expired in April. That agreement carried a 6% interest rate and formed part of Saudi Arabia's broader support package, under which nearly $6.7 billion has been provided for petroleum imports since 2019.

The renewed conflict in the Middle East has intensified concerns over energy security, with Brent crude prices rising by around $15 per barrel since hostilities between Iran and the United States escalated.

Pakistan is also exploring ways to ease upcoming external debt repayments, including liabilities related to Chinese energy projects, in an effort to reduce the need for another IMF programme after the current arrangement expires in September next year.

According to central bank data, Pakistan imported $14 billion worth of petroleum products during the first 11 months of the last fiscal year, while exports stood at $30.1 billion, leaving the country vulnerable to higher import costs if oil prices remain elevated.

Saudi Arabia remains one of Pakistan's largest bilateral financial partners after China and recently extended $3 billion in short term deposits through the SFD to support the country's external financing needs.

Finance Minister Muhammad Aurangzeb and Power Minister Sardar Awais Leghari also met Saudi Finance Minister Mohammed bin Abdullah Al-Jadaan to discuss expanding cooperation in economic and energy sectors. Both sides reaffirmed their commitment to strengthening bilateral ties.

Saudi Arabia has also continued providing assurances to the IMF regarding the rollover of its deposits in Pakistan, with total Saudi deposits reaching $8 billion by early July.

While the IMF has not included the proposed oil financing facility in its latest projections for Pakistan's external inflows, government officials believe such an agreement would help offset the impact of rising fuel import costs.

Saudi Arabia also remained Pakistan's largest source of workers' remittances, with overseas Pakistanis sending $9.8 billion from the Kingdom during the last fiscal year, accounting for nearly 24% of total remittance inflows.