Petrol shortage is expected in Pakistan as foreign banks have stopped offering trade credit for oil import to local refineries, and some suppliers are demanding payments to be made upfront to avoid potential problems resulting from the political crisis in the country.
According to The News, there is a petrol shortage expected in Pakistan during the coming days as international banks have refused to confirm letter of credits (LCs) for oil import orders citing “high country risk” alert. The development comes during the political tension in the country as PTI is holding protests demanding the coalition government to announce a date for early elections.
In order to import crude oil into the country, the local banks open LCs that are confirmed by international banks to provide guarantee to the exporter and in case the Pakistani banks defaults on a payment, its international counterpart pays the amount. However, due to the political unrest in the country, the international banks are showing restraint to confirm letter of credits (LCs).
The report states that three local refineries are in trouble as due to non-confirmation of their letter of credits (LCs). It means that their planned crude oil cargoes would not arrive in Pakistan and it will reduce the refining operations. It added that Pakistan was already struggling to ensure smooth supply of petroleum products due to rising global prices and government’s decision to keep the subsidies in place.
Meanwhile the oil sector has taken up the issue with the government and Secretary Petroleum has held a meeting in this regard. He has assured appropriate action is being taken to resolve the issue. “The State Bank of Pakistan is expected to step in and come up with some viable and speedy solution to the problem,” the report quoted its source.