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Russian delegation in Pakistan to finalise oil import deal

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  • Delegation is here to finalise agreement, including payment mode.
  • Once deal is done, Pakistan will place order for crude oil purchase. 
  • Russian ship will arrive in 26 days, most probably by mid-May.

ISLAMABAD: Pakistan moved a step closer to sealing its loan deal with Russia as the team has arrived in Karachi to fine-tune the deal on crude oil with counterparts in Pakistan State Oil (PSO), The News reported citing a senior official privy to the development.

“This time, we are expecting all the hurdles will be removed in importing crude oil from Russia,” the official said. However, the Energy Ministry is tight-lipped over the mode of payment and discount on crude oil prices.

It should be noted that last month the technical teams of the Operational Services Centre (PSC) — a Russian state-owned entity — held talks for two days on March 21-22 with the PSO team, which ended without progress on the constitution of Special Purpose Vehicle (SPV) responsible not only for importing the crude but also for the payments.

“The Russian delegation is here now to finalise the government-to-government agreement, including the mode of payment. Russia is currently asking for payment in China’s Yuan or Ruble, but Pakistan wants to pay in rupee,” the official told the publication.

According to inside sources, once the deal is done, Pakistan will place the order to Russia for crude oil purchase

“The Russian ship will arrive in 26 days, most probably by mid-May. The current Brent price in the international market hovers at $85.16 per barrel whereas the Russian oil is available at $47-48 per barrel.”

At the same time, according to top officials, the State Bank of Pakistan (SBP) is asking some local banks, including the National Bank of Pakistan (NBP), to open letters of credit for importing Russian oil but they are hesitant to do so mainly because of the G7 countries’ regulations of following the price cap of $60 per barrel or below it and making the payments under Society for Worldwide Interbank Financial Telecommunications (SWIFT) arrangement.

The officials said that PSO had never imported crude oil as it only imports finished petroleum products from various sources and diesel from KPC (Kuwait Petroleum Company). 

Refineries have been importing crude under long-term agreements from ADNOC and Saudi Aramco. But in the case of Russian crude, refineries will not be involved in the import, but it will be SPV with representatives from PSO and PSC.

“Pakistan may get Russian crude price with a discount close to $50 per barrel, $10 per barrel below the cap price imposed by G7 countries on Russian oil in the wake of the war on Ukraine,” relevant officials hinted.

However, one of the top guns in the coalition government said that the decision to import the Russian crude under the government-to-government agreement at a 30% discount may not provide the required relief as 26 days of transposition from the Russian port to Pakistan port will incur the per barrel shipping cost at $15 per barrel and $ 10 per barrel refining cost will erode the maximum discount.

On top of that, Pakistan refineries will only be able to extract just 10% MS out of Ural crude and 50% furnace oil. 

The refineries are already facing the ullage of furnace oil. The only consumption of furnace oil in Pakistan depends upon running the RFO-based power plants. 

The industrial sources suggest the government conduct a commercial analysis if the import of Russian oil will benefit Pakistan’s economy or not and, if yes, to what extent.

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In a first for history, PSX crosses the 77,000 milestone.

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At 77,213.31, the benchmark KSE-100 hit an all-time high, up 1,005.15, or 1.32%, from the previous close of 76,208.16.

The government’s readiness to seal an agreement with the International Monetary Fund (IMF) following the budget was cited by analysts as the reason for the upward trend.

Experts anticipate that in an attempt to bolster its position for a fresh bailout agreement with the International Monetary Fund (IMF), the budget for the fiscal year ending in June 2025 would set aggressive fiscal goals.

Budget for Pakistan, 2024–2025
Pakistan’s budget for the fiscal year 2024–25, with a total expenditure of Rs18.877 trillion, was presented on Wednesday by Minister of Finance and Revenue Muhammad Aurangzeb.

The Finance Minister, Muhammad Aurangzeb, outlined the budget highlights. He stated that the GDP growth target for the fiscal year 2024–25 is set at 3.6 percent, while the inflation rate is anticipated to stay at 12 percent.

He stated that while the primary surplus is anticipated to be 1.0 percent of GDP during the review period, the budget deficit to GDP is forecast to be 6.9 percent over the period under review.

According to the minister, tax income collection increased by 38% in the current fiscal year, and the province will receive Rs7,438 billion. The Federal Board of income expects to earn Rs12,970 billion in revenue for the upcoming fiscal year.

In contrast to the federal government’s projected net income of Rs9,119 billion, he stated that the federation’s non-tax revenue projections are set at Rs3,587 billion.

The federal government’s total outlays are projected to be Rs18,877 billion, with interest payments accounting for the remaining Rs9,775 billion.

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Pakistan currently has $14.38 billion in foreign exchange reserves.

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Pakistan’s commercial banks’ reserves, which stood at $5.28 billion at the conclusion of the week ending on June 7, rose by US$174 million, according to a central bank statement.

Reserving US$6.2 million less, the SBP now has US$9.10 billion in reserves. The causes for the decline in the reserves it had were not disclosed by the central bank.

The SBP released a statement that stated, “SBP reserves decreased by US$ 6 million to US$ 9,103.3 million during the week ended on 07-June-2024.”

The State Bank of Pakistan’s (SBP) foreign exchange reserves were reduced by US$ 63 million as a result of repaying external debt, with the reserves standing at US$ 9.093 billion as of earlier on June 6.

The central bank spokesperson said in a statement that as of the week that concluded on May 31, the nation’s total liquid foreign reserves were $14.31 billion.

In terms of net foreign reserves, commercial banks have US$ 5.22 billion of the overall foreign reserves, according to the SBP.

SBP reserves dropped by US$ 63 million to US$ 9,093.7 million during the week that ended on May 24, 2024, according to the announcement.

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In the local market, the price of gold plummets to Rs240,700/tola.

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Gold with a 24-karat purity level has dropped by Rs1200/tola on the local market.

Each tola of 24-karat gold is now selling for Rs240,700, with a further drop of Rs1029 bringing the price of 10 kilos of gold to Rs206,361. These figures are courtesy of the All Sarafa and Jewelers Association.

Meanwhile, after a $2 decline on the global market, one ounce of gold will be valued $2315.

A tola of gold was worth Rs 600 more on Wednesday.

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