“UAE authorities have confirmed to IMF for their bilateral support of $1 billion to Pakistan,” Dar tweeted. “The State Bank of Pakistan (SBP) is now engaged for needful documentation for taking the said deposit from UAE authorities.”
By Staff Reporter
ISLAMABAD: Finance Minister Ishaq Dar said on Friday the United Arab Emirates (UAE) has confirmed to the International Monetary Fund (IMF) its commitment to provide $1 billion in financial support to Pakistan – a prerequisite for moving forward with a long-delayed Fund’s bailout package intended to bolster the country’s ailing economy.
After the UAE reaffirmed its commitment to provide $1 billion in financial support to Pakistan, the country is now close to meeting the IMF’s requirements to release a much-needed tranche of funding.
This news comes as a relief to Pakistan, which has been struggling with economic difficulties exacerbated by the political and judicial crisis.
The UAE’s financial assistance is part of a larger $3 billion aid package that it pledged to Pakistan in 2018. This aid package includes $1 billion in cash and $2 billion in deferred payments for oil imports, which will help ease Pakistan’s balance of payments crisis.
“UAE authorities have confirmed to IMF for their bilateral support of $1 billion to Pakistan,” Dar tweeted. “The State Bank of Pakistan (SBP) is now engaged for needful documentation for taking the said deposit from UAE authorities.”
The IMF tranche is critical for Pakistan as central bank reserves have fallen to critical levels, barely enough for four weeks of imports. Securing the tranche will also unlock other external financing avenues and help Pakistan avert a default on its obligations.
Pakistan has less than a month’s worth of foreign exchange reserves and is awaiting a bailout package of $1.1 billion from the IMF that has been delayed since November over issues related to fiscal policy adjustments.
Pakistan is required to give an assurance that its balance of payments deficit is fully financed for the fiscal year ending in June to unlock the next tranche of IMF funding.
The IMF has recently stated that assurance from multilateral donors and bilateral partners like China, Saudi Arabia, and the UAE to fund the balance of payment gap is a prerequisite for securing the bailout deal.
Last week, the IMF informed Pakistani authorities that it has secured confirmation of the provision of $2 billion in additional deposits from the Kingdom of Saudi Arabia. Pakistan already sealed a $2 billion rollover loan from all-weather ally China.
The funds, which can only be released after signing a staff level agreement (SLA), are part of a $6.5 billion bailout package the IMF approved in 2019, which analysts say is critical for Pakistan to avert defaulting on external payment obligations.
A day earlier, IMF said that it hoped to complete its current programme with Pakistan successfully.
“My hope is that with the goodwill of everyone, with the implementation of what has been already agreed by the Pakistani authorities, we can complete our current programme successfully,” IMF Managing Director Kristalina Georgieva said at a news briefing in Washington on Thursday.
“We have been working very hard with the authorities in Pakistan to make sure that the policy framework is in place to avoid debt restructuring,” Georgieva said. “My hope is that in the context of what has already been agreed by the Pakistani authorities, we can successfully complete our current program.”
The IMF chief said Pakistan has not yet reached the level of default and that the Fund is seeking confirmation from international partners to meet the country’s financing gap requirements.
“We expect not to get to a point when the debt of Pakistan becomes unsustainable. We are not there yet.”
Meanwhile, Dar said the country is set to receive $300 million from the Industrial and Commercial Bank of China Ltd (ICBC), the last of three disbursements.
Pakistan has already received $1 billion from the institution.
“Out of Chinese Bank’s ICBC approved facility of $1.3 billion (which was earlier repaid by Pakistan). State Bank of Pakistan (SBP) would receive back third and last disbursement today in its account amounting to $300 million,” Dar said on Twitter.
This will “shore up forex reserves of Pakistan”.
Of the $1.3 billion, the ICBC gave Pakistan the first tranche of $500 million on March 4 while the second disbursement, also of $500 million, was received two weeks later on March 18.
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