Foreign banks have suspended offering trade credit for the imports of oil into Pakistani refineries, and some of the manufacturers have been requesting their payment in advance to prevent any problems in the future happening due to the country’s political gridlock. As per the sources of industry.
They explained the condition as “politically charged.” International banks have rejected confirming letter of credits (LCs) for orders for oil imports, citing a notification of “high country risk,” and Pakistan is expected to face a gasoline shortage in the coming days.
Local banks open Letters of Credit (LCs) for the import of crude oil from the global market. On the other hand, the international banks validate the LCs of local members just to give a guarantee to the exporter. If a Pakistani bank declines a payment to an exporter under the assurance, its foreign counterpart pays the amount.
“The danger for the country in the eyes of international banks has been raised, and they are reluctant to approve the LCs,” an oil sector source reported to The News.
According to the sources, the problem has also been worsened by a quasi-stalemate in Pakistan’s meeting with the International Monetary Fund (IMF).
“The impasse has given an outcome in a critical crisis of legitimacy for the government on the international level.”
The collapse in Sri Lanka developed a whole toxic environment in Pakistan, which was being taken as the next country on the verge of failure after a critical balance of issues for payment and a huge erosion of foreign exchange reserves.
“Not only has this issue substantially damaged the credit rating of Pakistan, but it has also raised the danger in the country, especially in terms of the confirmation of LCs.”
According to some sources, refineries and oil marketing corporations (OMCs) are in a critical and problematic situation.
“Refineries are having more critical problems than OMCs as they have huge cargoes.”
