Pakistan has approached Saudi Arabia to explore a long-term oil financing arrangement worth approximately $6.7 billion over 15 years, seeking to reduce immediate external financing pressures and strengthen energy security. Finance Minister Muhammad Aurangzeb raised the revival of the country’s annual $1.2 billion oil facility on deferred payments during a meeting with Saudi Fund for Development (SFD) Chief Executive Officer Sultan Abdulrahman Al-Marshad on the sidelines of the World Bank and International Monetary Fund annual meetings in Thailand. The discussions, held in Bangkok, also covered broader energy cooperation, trade, investment and development projects. According to people familiar with the discussions, Saudi Arabia was examining Pakistan’s request, although the Pakistani Finance Ministry did not provide a specific update on the facility or confirm any agreement.
Pakistan has received Saudi oil financing on deferred payment terms since 2019, allowing it to obtain petroleum products while postponing payment under agreed arrangements. The previous facility was signed in February 2025 and expired in April 2026. The government is now seeking a longer-term arrangement rather than relying exclusively on short-term financing, with the aim of spreading repayment obligations over a longer period and reducing pressure on its immediate foreign currency requirements. The proposed 15-year facility would represent a substantial extension of the financing horizon compared with the earlier one-year arrangements. However, the request remains under discussion, and the final amount, terms, interest rate and implementation schedule have not been confirmed.
According to the report, the earlier oil financing arrangement carried an interest rate of 6%, based on information from officials in the Ministry of Economic Affairs. Through the SFD, Saudi Arabia has provided approximately $6.7 billion in financing for oil derivatives to Pakistan since 2019. The Kingdom has also extended $3 billion in short-term financial support, which was rolled over for a further three months in July 2026. This deposit support has played a role in Pakistan’s external financing arrangements, including assistance with debt repayment obligations. Saudi Arabia has consequently remained an important bilateral financial partner for Pakistan as the government works to manage external debt and maintain sufficient foreign currency resources.
The proposed long-term oil facility comes as Pakistan faces substantial costs associated with petroleum imports. The country’s petroleum group import bill rose to $16.8 billion in the previous fiscal year, representing an increase of 5.8%. Within that total, crude oil import costs climbed by 32% to $7.2 billion. The pressure continued into the current fiscal year, with crude oil import costs increasing by a further 40% during July and August, according to the reported figures. Higher oil import costs can increase demand for foreign currency and place additional pressure on the country’s external account, particularly when global energy prices rise. A concessional deferred payment arrangement could help Pakistan manage the timing of these payments, although its ultimate impact would depend on the financing terms and the volume of petroleum covered.
Pakistan is also seeking to reduce its exposure to short-term external financing requirements as it plans for future debt repayments. The International Monetary Fund’s third staff-level report did not include the proposed Saudi oil facility among Pakistan’s projected inflows for fiscal years 2026-27 and 2027-28. The report assessed Pakistan’s annual gross financing needs for fiscal year 2027-28 at nearly $30 billion. Securing longer-term rollovers or financing arrangements for existing external obligations could help the government manage these requirements. Government officials indicated that a potential agreement with Saudi Arabia could offset some of the pressure associated with rising fuel import costs. However, until the facility is formally agreed and its details are established, it cannot be treated as a confirmed source of future financing.
During the meeting with the SFD chief executive, Aurangzeb highlighted improvements in Pakistan’s macroeconomic position and its renewed access to international capital markets. The Finance Ministry said discussions also covered opportunities to expand trade and investment, strengthen private-sector engagement, follow up on the bilateral investment protection agreement and explore refinery upgrades. Both sides noted satisfactory progress on projects supported by the SFD and emphasised the importance of developing a new pipeline of projects. The Saudi fund reaffirmed its continued support for Pakistan within its mandate, although the official statement did not specify whether the support included a commitment to the proposed oil facility.
Aurangzeb also met International Finance Corporation Regional Vice President for the Middle East and Central Asia Imad Fakhoury to discuss support for private-sector-led growth and employment. According to the Finance Ministry, the meeting reviewed the IFC’s expanding portfolio, small-business financing, entrepreneurship, capital markets, and green and digital bonds. Discussions also covered mining infrastructure, value addition, affordable housing, developer financing and agricultural development through improved storage facilities, cold chains and electronic warehouse receipt financing. The two sides explored greater private-sector participation in livestock development and potential support for pharmaceutical exports through stronger regulatory standards and investment. The finance minister reaffirmed the government’s commitment to Reko Diq and acknowledged the IFC’s role in financing.
The request for a 15-year Saudi oil financing facility reflects Pakistan’s efforts to secure longer-term support for essential energy imports while managing its external financing requirements. If approved, the arrangement could provide greater flexibility in meeting petroleum payment obligations and help the government plan its foreign currency needs over a longer period. Nevertheless, the proposal remains subject to discussions with Saudi authorities, and the IMF has not incorporated the facility into its projected inflows for the relevant fiscal years. The eventual effect on Pakistan’s finances will depend on the agreement’s final structure, financing costs, repayment conditions and the extent to which it reduces immediate payment pressures.
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