The going may just get tougher for Pakistan after close ally Saudi Arabia scrapped oil credit contract with Islamabad.

Until now, the terms of credit under which Islamabad has been receiving crude oil from Saudi Arabia has been ‘extremely’ favorable for the government. Analysts say that if the agreement is not renewed, oil shortage in Pakistan could get worse. Besides, it may have to shoulder a heavier import bill if oil supplies have to be procured from other countries. This will only add to Prime Minister Imran Khan’s woes especially at a time when the country’s economy is struggling.

Pakistan has already been facing shortage of oil with many pump stations facing an uncertain future.

Pakistan's Army Chief General Qamer Javed Bajwa has rushed to Riyadh with the aim to ease tensions between the two allies, which escalated after the country’s Foreign Minister Shah Mahmood Qureshi in a television on August 5 came down heavily on Saudi Arabia. Qureshi threatened to convene a meeting of the Organization of Islamic Conference (OIC)—the world’s largest bloc of Islamic countries)—on the issue of Kashmir. Saudi Arabia, one of the largest sources of remittances into Pakistan, has been declining Islamabad’s repeated requests of holding a meeting on Kashmir.

Since May, Saudi Arabia has stopped supplying oil to Islamabad on the deferred payment mechanism. In 2018 the two nations signed a $6.2-billion agreement. As part of this agreement, a $3.2-billion oil package was provided to the cash-strapped Pakistan government by Saudi Arabia. The move was aimed at easing Pakistan’s external sector woes. Pakistan, earlier this month, had to repay $1 billion of the $3.2 billion loan. The repayment was possible only after China extended financial assistance to the Khan government.

“The terms of credit given to Pakistan by Saudi Arabia have been extremely beneficial for Islamabad. While Pakistan can increase oil supply from other nations, including its neighbor Iran, credit facility may not be as favorable and this will certainly put more pressure on the government there. It is already facing a lot of problems and the worst sufferers would be the common people. The issue will continue to be a headache for Islamabad,” Narendra Taneja, energy expert and national spokesperson for BJP told IN..