Pakistan has asked Saudi Arabia to consider a new, long-term oil financing facility worth roughly $7 billion, as rising crude prices and shrinking foreign exchange reserves push the government to look for more stable energy financing. Here’s what’s being discussed.
What’s Being Proposed
Finance Minister Muhammad Aurangzeb raised the request with Sultan Abdulrahman Al-Marshad, CEO of the Saudi Fund for Development (SFD), on the sidelines of the World Bank and IMF annual meetings in Thailand. The proposal centers on reviving Pakistan’s existing $1.2 billion annual oil facility — which has run on one-year deferred payments since 2019 — but restructuring it into a much longer 15-year arrangement, with the SFD’s cumulative oil financing under this arrangement totaling around $6.7 billion (commonly rounded to $7 billion in headlines).
The goal is straightforward: reduce Pakistan’s near-term external financing pressure and ease the strain on foreign exchange reserves as fuel import costs keep climbing.
Where Things Currently Stand
Saudi Arabia hasn’t given a public response yet. According to people familiar with the discussions, the Kingdom is still “examining the proposal.” The Finance Ministry’s official handout from the meeting didn’t comment directly on the oil facility, and when asked about Saudi Arabia’s reply, Adviser to the Finance Minister Khurram Schehzad did not respond. Notably, the IMF’s third staff-level report doesn’t include this facility in its projected inflows for either FY2026-27 or FY2027-28 — meaning it’s being treated as uncertain, not yet a done deal.
Why Pakistan Wants This Now
- Pakistan’s total petroleum import bill rose 5.8% to $16.8 billion in FY2025-26.
- Crude oil import costs specifically rose 32% to $7.2 billion in the same year, and climbed a further 40% in July and August of the current fiscal year alone.
- The previous one-year Saudi oil facility, signed in February 2025, expired in April 2026 and carried a relatively high 6% interest rate — officials attributed this to terms set before the Pak-Saudi Strategic Partnership Agreement.
- A longer-term, lower-cost facility would help Pakistan manage debt repayments more broadly, including obligations tied to Chinese energy debt, and reduce pressure that might otherwise require a new IMF programme once the current arrangement wraps up.
The Bigger Saudi-Pakistan Financial Relationship
Saudi Arabia has become Pakistan’s largest bilateral lender after China. Separately from the oil facility, the SFD has also extended $3 billion in short-term financing to Pakistan, which was rolled over for three months in July — funds that helped Pakistan meet debt repayments to the UAE. Beyond the oil discussion, Aurangzeb and Saudi officials also covered expanding trade and investment, private-sector engagement, a bilateral investment protection agreement, and potential refinery upgrades, agreeing to develop a new project pipeline together.
Frequently Asked Questions
Has Saudi Arabia agreed to the $7 billion oil facility?
No. As of now, Saudi Arabia is still reviewing the proposal, and no agreement has been finalized or publicly confirmed.
Why does the figure appear as both $6.7 billion and $7 billion?
$6.7 billion is the precise cumulative figure tied to the Saudi Fund for Development’s oil financing since 2019; $7 billion is simply a rounded version commonly used in headlines.
What interest rate is Pakistan hoping for?
This hasn’t been publicly disclosed yet. The previous one-year facility carried a 6% rate, which Pakistan is hoping to improve upon with more favorable long-term terms.
Why does Pakistan need this facility so urgently?
Crude oil import costs have risen sharply — up 32% in FY2025-26 and a further 40% in July-August of the current fiscal year — putting real pressure on Pakistan’s foreign exchange reserves.
With Saudi Arabia still weighing the proposal and the IMF not yet counting on it in its own projections, this remains very much a negotiation in progress rather than a settled deal — worth watching for updates as talks continue.
