Saudi Arabia pledges $1b oil facility to Pakistan

Saudi Arabia has pledged to extend a $1 billion oil financing facility to Pakistan during the current fiscal 2025–26, while also rolling over $5 billion in deposits, officials from the Ministry of Finance confirmed on Monday.

According to ministry officials, the $1 billion oil facility will help Pakistan meet its energy import requirements and ease pressure on its foreign reserves. Officials said, the Kingdom will also roll over $5 billion in time deposits currently placed with the State Bank of Pakistan. Of the amount, $2 billion is due in December and $3 billion in June of 2026.

During the first quarter of the current fiscal year, Pakistan received over Rs85 billion worth of oil supplies under the Saudi facility, equal to about $300 million. The facility provides roughly $100 million per month, translating to Rs28.37 billion monthly in local currency.

The Saudi deposits, carrying a 4% annual interest rate, have been renewed each year to support Pakistan’s external account. The total value of the deposits stands at approximately Rs1.45 trillion, extended as budgetary support. Officials said the continuation of these facilities underscores Riyadh’s commitment to Pakistan’s economic stability amid persistent fiscal challenges.

Meanwhile, Prime Minister Shehbaz Sharif arrived in Riyadh for a three-day visit to the Kingdom of Saudi Arabia, where he was warmly received by Saudi dignitaries. During the visit, he will also attend the 9th edition of the Future Investment Initiative.

Last month, Pakistan and Saudi Arabia signed a landmark "Strategic Mutual Defence Agreement", declaring that 'any aggression against either country shall be considered an aggression against both', according to a Pak-Saudi joint statement. The pact was signed during PM Shehbaz's visit to Riyadh at the invitation of Saudi Crown Prince and Prime Minister Mohammed bin Salman bin Abdulaziz Al Saud.

Pakistan and Saudi Arabia have longstanding strategic and defence cooperation but the latest pact is seen as significant against the backdrop of recent developments including Israeli strikes on Qatar.

In pursuance of the historic defence agreement with Saudi Arabia, the federal government constituted an 18-member high-level committee earlier this month. The task of the committee is to lead economic negotiations between the two nations under the Pakistan–Saudi Arabia Economic Framework, the government notification said.

As per the notification, the committee, formed by PM Shehbaz, will supervise discussions aimed at expanding cooperation beyond defence and energy to include environmental protection and climate stability.