Kuwait’s decision to extend its oil credit facility for Pakistan by another two years comes as a timely boost to the country’s external financial stability. The move, which allows Pakistan State Oil (PSO) to continue importing 1.8 million tons of oil annually on a 90-day deferred payment basis, is expected to ease pressure on Pakistan’s foreign reserves and support its ongoing efforts to stabilize the economy.
Energy Security on Deferred Terms
Under the renewed agreement, PSO will be able to import petroleum products without the immediate burden of upfront payments. This deferred payment model ensures a steady energy supply while conserving foreign exchange reserves. With global oil prices remaining volatile, this credit line serves as a lifeline for Pakistan’s energy-dependent economy.
The extension reflects strong bilateral cooperation between Pakistan and Kuwait and signals confidence in Pakistan’s ability to manage its obligations. It also provides breathing space for policymakers to focus on broader economic reforms without the looming pressure of energy-related payments.
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Current Account Shows Strong Recovery
In another positive development, Pakistan recorded a record current account surplus of $1.195 billion in March 2025, according to data released by the State Bank of Pakistan. This marks a significant turnaround compared to March 2024, when the surplus stood at $363 million.
The monthly surplus in March is the highest in the country’s history and highlights the impact of tight import controls, improved remittance flows, and prudent fiscal management. This strong showing helped lift the current account to a surplus of $1.859 billion for the first nine months of the current fiscal year.
In contrast, the same period last year posted a deficit of $1.652 billion, showcasing a marked improvement in Pakistan’s external sector performance.
Reduced Import Bill and Improved Balance
The combination of the oil credit facility and disciplined economic management has contributed to a healthier balance of payments. Deferred oil payments reduce the immediate outflow of foreign exchange, allowing reserves to be allocated more effectively. This strategy has played a crucial role in turning a current account deficit into a surplus within just one fiscal year.
In addition, export receipts have shown modest growth while remittances from overseas Pakistanis continue to provide a reliable stream of foreign currency. The financial discipline adopted over recent months is now yielding results, providing space for potential long-term economic planning.
A Turning Point for Stability
Pakistan’s recent external account performance reflects a strategic pivot towards sustainability. While global uncertainties persist, the country’s ability to secure bilateral support like the oil credit from Kuwait, paired with internal reforms, is paving the way for financial stability.
These developments not only ease pressure on the currency and reserves but also restore confidence among investors, development partners, and the business community.
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