Islamic Dev’t Bank to give $600m commodity financing
The International Islamic Trade Finance Corporation (ITFC) - a subsidiary of the Islamic Development Bank - would make available this month about $600 million of syndicated loan for commodity financing.
An official statement said this was conveyed to Pakistan during a virtual meeting between Minister for Economic Affairs Omar Ayub Khan and ITFC Chief Executive Officer Hani Salem Sonbol. "The CEO ITFC updated that the ongoing syndication is about to complete and $600m will be available to Pakistan during this month," the statement said.
This is part of the $4.5bn new framework agreement signed by the two sides in June this year to finance oil, LNG and fertiliser imports over the next three years (2021-23).
The Ministry of Economic Affairs said the ITFC chief also assured the minister that Pakistan remained the top priority for it to invest in trade financing and meet country's POL procurement requirements. The meeting also discussed how ITFC can arrange financing for broader trade activities in Pakistan under commodity financing.
Mr Ayub appreciated ITFC for arranging financing of about $7bn for import oil & LNG from 2008 to 2021 and told Mr Salem that Pakistan's POL financing requirement was much bigger and the ITFC could enhance its financing from the existing $1.5bn each year. The minister also discussed how this financing facility could also be utilised for import of food related commodities.
Mr Salem appreciated Pakistan's interest in ITFC to meet the short-term trade financing needs and encouraged to include other commodities in addition to POL to increase annual financing from $1.1bn under previous arrangement to $1.5bn under current arrangement.
He informed the minister that ITFC had arranged two Warehouse Receipt Financing workshops in Islamabad and Karachi during 2019 in collaboration of EAD and State Bank of Pakistan and will provide technical assistance for capacity building in the agriculture sector.
The $4.5bn financing signed by two sides in June this year is to be utilised by Pakistan State Oil (PSO), Pak-Arab Refinery Ltd (Parco) and Pakistan LNG Ltd (PLL) for import of crude oil, refined petroleum products and LNG during the years 2021-2023.
Within the context of its trade integrated solutions approach, the framework agreement also covers ITFC's support for trade related technical assistance projects in Pakistan, which will be selected jointly by both parties according to the national economic priorities and development plan of Pakistan.
The agreement also requires identification of other areas of cooperation at country and regional levels and to enhance and promote trade, trade capacities of relevant state authorities and financial institutions and trade cooperation in the country.
The ITFC had also committed in April 2018 a similar financing line for Pakistan for 2018-20, but utilisation finally could not cross $3bn as private refineries were unable to import crude under the facility which mostly remained limited to Parco and to some extent to PSO.