London, July 12 : Saudi Arabia has agreed in principle to defer payments for crude oil sales to Pakistan expected to be worth approximately 5.9 billion dollars at present rates during Pakistan's present July-June financial year.
This would provide a significant boost to the Pakistan's economy just when it is coping with fast-mounting political and economic difficulties.
"There is an agreement in principle to defer oil payments. The modalities are being worked out," said Pakistan's Finance Minister Naveed Qamar.
While Qamar did not discuss the time span for which payments on Saudi oil shipments would be deferred, an official from the Petroleum Ministry in Islamabad separately told the Financial Times that the agreement involved deferring payments until at least June 2009 when the financial year ended.
Deferring payments would help Pakistan pass through a period when its finances are being squeezed. It is not clear if the deferred payments would be paid back.
One western diplomat familiar with Saudi ties to Pakistan said the Saudis in 1998 began supplying crude oil under a deferred payment plan after Pakistan carried out its maiden nuclear tests and came under international sanctions.
The Saudi gesture is expected at least partially to give back some confidence to investors in Pakistan. This had been lost this year owing to harsh economic conditions and growing internal political uncertainty over divisions between US-supported President Pervez Musharraf and newly elected politicians.
Qamar said Saudi Arabia's support "would obviously help the situation a great deal".
According to Pakistani officials, Saudi Arabia sells about 110,000 barrels of crude oil daily to Pakistan or about 40m barrels a year which at 147 dollars a barrel comes to about 5.88bn dollars. Pakistan imports a total of 202,000 b/d or approximately 73.7m barrels a year - half of that from Saudi Arabia.