Pakistan is seeking a long-term oil financing agreement worth approximately $6.7 billion with Saudi Arabia to ease pressure on its foreign exchange reserves and reduce immediate external financing needs. The proposed arrangement would provide concessional financing over 15 years, helping Pakistan manage petroleum imports amid rising international energy prices.
Finance Minister Muhammad Aurangzeb raised the proposal during a meeting with Saudi Fund for Development Chief Executive Officer Sultan Abdulrahman Al-Marshad on the sidelines of the World Bank and International Monetary Fund annual meetings in Thailand. The discussions also covered broader economic cooperation and investment opportunities.
Government Seeks Long-Term Oil Financing
Pakistan is pursuing the revival of its annual $1.2 billion deferred-payment oil facility alongside the proposed long-term financing arrangement. Saudi Arabia previously provided oil financing through successive agreements, with the latest facility signed in February 2025 before expiring in April 2026.
The previous arrangement carried an interest rate of 6 percent, according to government officials. However, Pakistan now wants a longer-term agreement to reduce immediate payment obligations and strengthen its ability to manage external financial pressures.
Saudi Arabia has provided approximately $6.7 billion in oil financing to Pakistan since 2019. Additionally, the kingdom recently extended $3 billion in short-term financial support through the development fund to help Pakistan manage its external obligations.
Rising Import Costs Increase Financial Pressure
Pakistan’s petroleum import bill increased by 5.8 percent to $16.8 billion during the previous fiscal year. Meanwhile, crude oil import costs rose 32 percent to $7.2 billion, followed by another 40 percent increase during July and August of the current fiscal year.
These rising costs have increased pressure on Pakistan’s foreign exchange reserves and financing requirements. Consequently, the government is exploring longer-term financial arrangements to manage energy imports and limit immediate repayment obligations.
The International Monetary Fund has not included the proposed Saudi oil facility in its projected inflows for fiscal years 2026-27 and 2027-28. Therefore, Pakistan will need to secure an agreement before the financing can provide additional support to its external position.
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