The Abu Dhabi Fund for Development has allocated $3 billion to Pakistan through a deposit into the country's central bank, the fund said on Tuesday. Pakistan is battling to bring under control a gaping current account deficit that has hurt its economy and lowered growth.
The deposit was announced in December. It is aimed at supporting Pakistan's economic growth and helping it achieve its monetary policy targets.
Business Recorder staff reporter Rizwan Bhatti adds: Pakistan on Tuesday signed an agreement with the UAE for placement of $3 billion for balance of payment support, the spokesman for State Bank of Pakistan (SBP) confirmed. Abid Qamar spokesman SBP said that a signing ceremony for $3 billion package was held in Abu Dhabi and on behalf of Pakistan Tariq Bajwa governor State Bank of Pakistan has signed the agreement with Abu Dhabi Fund for Development (ADFD). He said that the payment schedule will be confirmed later; however, most probably the amount is likely to arrive very soon.
In December, an amount of $3 billion was pledged by the UAE during the visit of Prime Minister of Pakistan Imran Khan. Sources said that as per agreement the entire amount will be disbursed in three weeks. Out of $3 billion, the UAE will transfer $1 billion to Pakistan within the next few days while the remaining $2 billion will be released in two installments in two weeks. On behalf the UAE, Director General Mohammad Said Al Suwaidi signed the agreement.
Currently, Pakistan is facing a huge balance of payment challenge due to higher external debt servicing and massive current account deficit, of which foreign exchange reserves held by the SBP are on decline and reached below $7 billion mark end of the last week.
In order to overcome from balance of payment crisis, Pakistan has been seeking financial support from the neighboring countries including Saudi Arabia, China, the UAE and Qatar to finance the external account and build the rapidly depleting foreign exchange reserves. Saudi Arabia was the first country, which announced a bailout package of worth $6 billion $3 billion financial support and another $3 billion in the shape of one-year deferred oil payment facility. Out of $3 billion, some $2 billion was released by Saudi Arabia in two tranches of one billion each in November and December 2018. While, another one billion dollar is likely to be received in January. Economists said that with arrival of inflows from UAE and Saudi Arabia pressure on external account will be considerably reduced.
Currently, Prime Minister of Pakistan Imran Khan is visiting Qatar to discuss business deals including export of manpower and import of LNG. Pakistan is also negotiating with the International Monetary Fund (IMF) for a possible loan package for balance of payment crisis. The first round of talks (technical level) with IMF officials was held in the second week of November in Islamabad.
Initially Pakistan was seeking a bailout package of $12 billion from the IMF to overcome from this crisis, however with arrival of inflows from Saudi Arabia and now signing of an agreement with the UAE, Pakistan is most likely to ask the IMF for a $5 to $6 billion bailout package.
It may be mentioned here that the country's current account deficit was $8 billion in the first half (July-Dec) of this fiscal year (FY19) compared to $8.4 billion in the same period of last fiscal year (FY18). However, month-on-month basis current account deficit increased sharply 37 percent or $450 million to $1.66 billion in December 2018 compared to $1.21 billion in November 2018.
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