Pakistan on Tuesday approved a supplementary grant of Rs27 billion (roughly $100 million) for payments to Kuwait Petroleum Corporation in order to keep Pakistan State Oil (PSO), the country’s primary fuel supplier, from going into formal default.
The Economic Coordination Committee (ECC) of the cabinet, which approved the supplementary grant to settle the diesel payments, also sanctioned another Rs2.9 billion to partly offset the wheat shortage in the Gilgit-Baltistan region.
The two decisions by the cabinet body show the extreme economic difficulties that the government is facing in avoiding a default in one area but ending up creating troubles in others.
The ECC had last week allowed a Rs50bn sovereign guarantee for commercial borrowing by Sui Northern Pipelines Ltd for partial payment of over Rs498bn payables to PSO.
However, PSO issued a formal “SOS call” that a technical default had already occurred but required an emergent foreign exchange to avoid its repercussions.
The finance ministry stated that the PSO deposited the rupee equivalent with the National Bank of Pakistan (NBP) after 30 days from the date of the bill of lading of each shipment.
The NBP then transferred the cargo cost to the KPC in Kuwait.
“In the current situation, this account has witnessed huge exchange losses due to upheaval in the rupee-dollar parity during the last 12 months,” the finance ministry’s statement read.
“Considering the above situation, the ECC approved an immediate technical supplementary grant of Rs27 billion for [the] Kuwait Petroleum Company,” it added.
