The State Bank of Pakistan (SBP) and the Ministry of Finance (MoF) were urgently enlisted by the Ministry of Energy’s Petroleum Division on Friday to help arrange the opening of letters of credit (LCs) for fuel imports after the entire industry, including oil marketing companies and refineries, raised concerns about impending supply disruption.
Similarly to this, the telecom sector expressed concerns in a letter to the IT ministry regarding banks’ refusal to open Letters of Credit (LCs) for the telecom companies and claimed that the restrictions were delaying the completion of new projects.
Informed sources said that not only the Oil Companies Advisory Council — an association of more than three dozen refineries and market companies — but also the leading refineries and marketing companies, including Pakistan State Oil (PSO), had complained about the shortage of exchange reserves and refusal of private banks to open LCs for oil imports.
On Thursday, a meeting between Tariq Bajwa, the prime minister’s financial adviser, and members of the oil business similarly ended in failure.
The petroleum division and Oil and Gas Regulatory Authority (Ogra) are currently writing letters to MoF and SBP to protect their positions in the event of any supply disruption that could take longer than six weeks to restore, according to an official who stated that the supply chain was on the verge of collapsing.
As official reserves have fallen below $4.3 billion, rationing foreign exchange supplies is the finance ministry’s and the central bank’s official policy.
The Ogra and PSO had reported “insufficiency of credit lines and reluctance by the banks to grant letters of credit for oil imports due to various apprehensions,” the petroleum division informed the MoF and SBP.
The OMCs must import petroleum goods like diesel, gasoline, and jet fuel to meet the needs of the nation, so it was important for the local banks to assist in facilitating the necessary foreign exchange and imports. In order to import gasoline, including lubricants, it was asked that SBP and MOF “intervene in the matter and advise the relevant banks to open necessary LCs.”
The state-run PSO reported that the SBP had “given directives to banks to restrict the establishment of LCs to only essential commodities” because of depleting reserves and a problem with dollar availability with commercial banks.
PSO thought POL products were on the list of essentials, but starting this week (on January 9), the national fuel supplier was unable to open specific LCs for the import of gasoline and lubricants due to a lack of available dollars.