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UAE comes to Pakistan's rescue with $3b bailout package

Muzaffar Rizvi/Abu Dhabi
Filed on December 21, 2018 | Last updated on December 21, 2018 at 11.18 am
UAE comes to Pakistans rescue with $3b bailout package
The UAE's aid package will help resolve Pakistan's balance of payment crisis.

(Reuters)

Move to enhance liquidity and monetary reserves of foreign currency at central bank

The UAE on Friday announced a Dh11 billion ($3 billion) bailout package for Pakistan that will help ease Islamabad's balance-of-payment crisis. This could place the country in a better position to negotiate a $15 billion standby-agreement with the IMF early next year.

In a statement, the Abu Dhabi Fund for Development (ADFD) said it would deposit Dh11 billion in the State Bank of Pakistan (SBP).

Pakistan Prime Minister Imran Khan hailed the UAE's decision. "I want to thank the UAE government for supporting Pakistan so generously in our testing times," Khan posted on Twitter shortly after the announcement.

"This reflects our commitment and friendship that has remained steadfast over the years," he added.

Pakistan's Foreign Minister Shah Mahmood Qureshi also thanked the UAE leadership and lauded His Highness Sheikh Mohamed bin Zayed Al Nahyan, Crown Prince of Abu Dhabi and Deputy Supreme Commander of the UAE Armed Forces, who is expected to visit Pakistan in January 2019 to strengthen the bilateral relationship between the two countries.

"We thank His Highness Sheikh Mohamed bin Zayed for his generous financial support of $3 billion. This is a manifestation of the close fraternal ties between Pakistan and the UAE which have always stood the test of time," Mahmood tweeted.

The ADFD has financed eight development projects in Pakistan with a total value of Dh1.5 billion, including Dh931 million in grants. The funds covered projects in sectors such as energy, health, education and roads.

Economists said timely financial assistance from the UAE and Saudi Arabia will stablise Pakistan's economy in general and the rupee in particular besides easing pressure on Finance Minister Asad Umer, who is negotiating its 13th IMF bailout since 1980s.

In late October, Saudi Arabia announced that it would offer $3 billion to Pakistan in addition to another $3 billion to buying oil on deferred payments. It has already transferred $2 billion into the SBP account and the remaining $1 billion is likely to be deposited next month.

Imran Khan also secured a package during his first official visit to China early November, but financial details have not disclosed.

Muzzammil Aslam, former CEO of EFG-Hermes Pakistan, said the timely financial help of the UAE will help resolve economic problems of Pakistan in general and the balance-of-payments crisis in particular.

"The $3 billion deposit commitment from the UAE has hedged Pakistan balance of payment crisis," Aslam told Khaleej Times from Karachi.

Pakistan is expecting $12 billion inflows from its close allies such as UAE, Saudi Arabia and China during financial year 2018-19.

It includes $6 billion in the shape of monetary authorization deposits from the UAE and Saudi Arabia and another $4 billion from unidentified avenues, according to finance ministry officials. The country's gross financing requirements are estimated at $21.45 billion by June 30, 2019.

Aslam said the Pakistan government will now re-assess its request to enter a standby agreement programme with the International Monetary Fund.

"The finance team led by Asad Umer is working on plan independent of IMF-suggested measures," he said.


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