Country’s decisions makers are known for not taking the right decisions at the right time. Two such late decisions in the recent months have cost the nation and its citizens dearly.

One is the delay in securing the crude oil deal from Russia at discounted rates and favorable terms and the other is inordinate delay in coming to terms with the International Monetary Fund (IMF) in order to unlock stalled lending.

Both the delays put together have severely dented the country’s fragile economy and have forced its citizens to live with unbearable inflation.

The incumbent government, upon receiving the nod from the US, is currently in the process of sealing a deal with Moscow to procure crude oil, understandably at a discounted price and on favourable payments terms.

A spokesperson for the US, in his regular briefing this week, stated that the US has no objection to Pakistan importing Russian oil.

In reply to a question, he clarified that the US has also no objection to Russia and Pakistan having trade ties. This implies that Pakistan did receive the nod from the US to proceed with sourcing oil from Russia.

The ongoing oil deal with Russia is however too late in the day on account of its timings and terms. Much damage in the meantime has been done to Pakistan’s economy because of eight months’ delay.

It was in February 2022 that the then Prime Minister, Imran Khan, broached the Russian soil for confidence building between the two countries that have often been at odds with each other. Immediately thereafter, the Russian-Ukraine conflict began that landed Pakistan delegation in awkward diplomatic situation.

Russia, foreseeing sanctions and active engagement of the West in the conflict, direly needed diplomatic support and buyers for its products to politically and economically sustain the conflict as its economy was in a bind.

Russia is reported to have then offered to sell crude oil to Pakistan on the same terms as supplied to its traditional partner India - meaning at a 50 percent discount as against the prevailing global price.

Russia is now fairly out of a difficult situation of global isolation and is no longer in a tight spot. Pakistan is therefore unlikely to now gain the concessions that were possibly available in February 2022. Good deals are all about timings. There has also been a delay of around three months to get the IMF programme back on the rails and begin formal talks on the ninth review.

The government, fearful of political and social fallout or public backlash, cast aside the tough conditions-laden Fund Programme and instead desperately tried to secure funding from other sources; notably, from friendly countries.

SBP Governor Jameel Ahmad had last week said that the country expected inflows from “next week”; however, no funds have been received so far — except for a $2 billion rollover by the Abu Dhabi Fund for Development.

The government, after exploring all other options without any success, is now desperately seeking to revive the ninth Extended Fund Facility review and has requested the Fund to send a delegation to Pakistan. The Fund mission is scheduled to visit Islamabad from January 31-February 9 for talks under the ninth EFF review.

In a statement, the SBP had said that as of January 20, its reserves fell to $3,678.4 million due to external debt repayments, which will now provide an import cover of less than a month —73 percentage of a month to be exact.

The net foreign reserves held by commercial banks have also fallen to $5,774.8 million, bringing the total liquid foreign reserves to $9,453.2 million, the central bank’s statement said.

The benefits of discounted Russian oil will not be felt before six months at the earliest considering the amount of time in relation to its transportation, refining and availability to consumers.

The time-frame for concluding the agreement with the IMF is open ended as there are indications that the government may yet make another attempt to seek concessions from it.

The country is running out of time and resources to salvage the situation. Delay is no longer an option.

Copyright Business Recorder, 2023

Farhat Ali

The writer is a former President, Overseas Investors Chamber of Commerce and Industry


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Troy Jan 29, 2023 11:16am
Has anyone even thought about how we will refine Russian oil the closest area to refine Russian oil is India
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Builder Jan 29, 2023 03:41pm
@Troy I hope Russian crude is just like any other crude and not a special blend from Marse.
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