Pakistan asks Saudi-based IsDB for additional oil financing, service charge waiver

• Pakistan asks IsDB to increase oil facility from $50 million to $100 million.
• IsDB has proposed service charges of less than 1%.
• It remains to be seen how Pakistan’s request will be accepted.

ISLAMABAD: The Islamic Development Bank (IsDB) has proposed increased service charges following Pakistan’s request for an additional oil financing facility, but Islamabad has asked the lender to back off, according to The news on Thursday.

Officials of the Prime Minister’s Secretariat said The news that following the staff-level agreement with the International Monetary Fund (IMF), Pakistan is negotiating with the Jeddah-based lender to increase the oil facility from $50 million to $100 million by the end of December 2023. They are also discussing the ability to reduce the level of service charges levied on this facility.

“IsDB has proposed service charges of less than 1% for captive oil facilities, but we have submitted a request to be granted a waiver or reduce it,” an official told the publication.

The term sheet indicates that service charges are approximately 0.05% to 0.5%. The IsDB had already provided $100 million in September 2023 for oil financing and has said it may provide a $50 million facility by the end of December.

It is yet to be seen how Pakistan’s request will be received by the IsDB’s management and board when it meets on December 11.

The IsDB Executive Board is also due to meet next month to approve $300 million in syndicate funding.

With the signing of the SLA with the IMF, all other multilateral creditors, including the World Bank, the Asian Infrastructure Investment Bank (AIIB) and the Asian Development Bank (ADB) responded positively and indicated a willingness to resume program lending.

According The newsthe three multilateral institutions are set to give approval for program loans in December 2023.

ADB’s board of directors is expected to hold a meeting on December 4 in Manila to review the $350 million Domestic Resource Mobilization (DRM) program loan for Pakistan.

The World Bank is expected to approve RISE-II on December 20, while the AIIB is set to consider approving $250 million on December 21, just days before the start of the Christmas and New Year holidays.

The date of the IMF’s Executive Board has not yet been confirmed nor communicated when it will meet to grant approval for Pakistan’s next tranche. It can be held on either December 7th or December 13th or 14th.

However, it is likely that the IMF’s Executive Board will grant approval for a $700 million tranche before the Christmas holidays.

If everything materializes, then Islamabad expects a disbursement of $1.7 billion to $1.8 billion in December.

Out of the total gross financing requirement of $25 billion, Pakistan has so far realized $5 billion from all multilateral and bilateral creditors in the form of loan disbursements and term deposits.

EXIM Bank of China has also granted conversion of $1.2 billion so far this fiscal year.

Pakistan has also made a fresh request to credit rating agencies to review their ratings after the IMF approves the next tranche next month.