UAE approves additional USD 1 billion funding to Pakistan

Islamabad: Pakistan's Finance Minister Ishaq Dhar on Friday announced that the UAE has approved USD 1 billion in financial support, taking the cash-strapped nation a step closer to unlocking the crucial IMF bailout.

Pakistan is tackling a major economic crisis as it awaits a much-needed USD 1.1 billion tranche of funding from the Washington-based International Monetary Fund, part of a USD 6.5 billion bailout package the IMF approved in 2019.

Finance Minister Dar said the Gulf nation has confirmed its commitment to the International Monetary Fund, paving way for the staff-level agreement to unlock a USD 1.1 billion loan by the global lender.

“UAE authorities have confirmed to IMF for their bilateral support of USD 1 billion to Pakistan,” Dar said in a tweet, adding that the State Bank of Pakistan (SBP) was now “engaged for needful documentation for taking the said deposit from UAE authorities”.

The UAE rolled over its deposits of USD 2 billion in January this year too, providing critical support to cash-starved Pakistan's depleting foreign exchange reserves.

In another tweet, Dar announced that the apex bank is getting the third and last disbursement from the Industrial and Commercial Bank of China (ICBC), worth USD 300 million, out of its USD 1.3 billion loan.

“Out of Chinese bank’s ICBC approved facility of USD 1.3bn (which was earlier repaid by Pakistan), State Bank of Pakistan would receive back third and last disbursement today in its account amounting to USD 300mn,” the finance minister tweeted.

The ICBC approved a rollover of a USD 1.3 billion loan for Pakistan on March 3 and made the first payment of USD 500 million on the same day, while the second payment of the same amount was made on March 17.

The IMF lowered its forecast for Pakistan’s economic growth rate days ago from 2 per cent to just 0.5 per cent for the current fiscal year amid high inflation and a growing unemployment rate in the cash-strapped country.

The new development brought debt-struck Pakistan closer to signing the staff-level agreement with the IMF and getting access to multilateral loans.

Pakistan is tethering on the verge of default with just over USD 4 billion in reserves as it grapples with high external debt and a weak local currency. All its hopes are tied to the IMF reviving the USD 7 billion bailout programme and releasing a USD 1.1 billion tranche, originally due to be disbursed in November last year.

The funds are part of a USD 6.5 billion bailout package the IMF approved in 2019, which analysts say is critical if Pakistan is to avoid defaulting on external debt obligations.

The IMF programme, signed in 2019, will expire on June 30, 2023, and under the set guidelines, the programme cannot be extended beyond the deadline.

Pakistan and the IMF have been negotiating the programme's resumption for months but have yet to reach an agreement.