Saturday, June 15, 2024

UAE Likely to Commit $1 Billion Financial Support To Pakistan This Week

Islamabad: According to sources cited by Local News, the United Arab Emirates (UAE) is set to offer $1 billion in finance this week to assist Pakistan in fulfilling one of the final requirements for an IMF deal that Islamabad needs to avoid default.

To close its balance of payment imbalance for this fiscal year, which ends in June, the IMF has asked Pakistan to obtain guarantees on external finance from allies and multilateral partners.

According to reliable sources in the Ministry of Finance, the UAE is set to give a written guarantee for a $1 billion loan this week. The Finance Secretary, Hamed Yaqoob Sheikh, will inform Fund officials of the development during the spring conference in Washington.

Saudi Arabia informed the IMF last week that it will finance Pakistan with a $2 billion pledge. The agreement with the IMF still depends on the UAE making a similar pledge to lend them $1 billion.

Sources close to the Ministry of Finance acknowledged that agreements had been reached with the UAE, and the IMF would be informed as soon as Pakistan received a written guarantee from the Gulf nation.

The new development followed requests made to UAE officials by Prime Minister Shehbaz Sharif and Finance Minister Ishaq Dar to complete Fund criteria.

The 220 million-person country is amid one of the worst economic crises in its history as interest rates were raised to an all-time high after consumer prices accelerated to a new record.

As the country struggles with a dollar shortage that causes supply chain delays and company production shutdowns, the IMF has reduced its growth forecast from an earlier estimate of 2% to 0.5%.

Although the finance minister had said that the IMF had been given the necessary information, the Fund is also evaluating the coalition government’s proposed fuel discount that it offers for lower-income groups by hiking fuel costs for wealthier motorists.

Since late January, Islamabad has been hosting an IMF mission negotiating several policy changes to secure $1.1 billion in aid for the struggling economy, which is at the point of collapse.

The money is part of a bailout package of $6.5 billion that the IMF authorised in 2019, which analysts say is essential for Pakistan to avoid defaulting on its responsibilities for external payments.

The agreement would also open up additional bilateral and multilateral funding options for Pakistan, which will help it stabilise its foreign exchange reserves, which have decreased to only four weeks’ worth of import coverage, and allow it avoid a balance of payment crisis.

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