The United Arab Emirates will deposit $3 billion in the central bank of Pakistan to help “enhance liquidity” as the country struggles with a balance of payments crisis, state media said.
The transfer of 11 billion dirhams by the government-owned Abu Dhabi Fund for Development (ADFD) is expected to be carried out in the “coming days”, the WAM news agency said.
Quoting a statement from the ADFD, the state news agency said the amount is meant “to support the financial and monetary policy of the Islamic Republic of Pakistan”.
It will “enhance liquidity and monetary reserves of foreign currency” at the central bank, it added.
Prime Minister Imran Khan welcomed the UAE government’s announcement to deposit $3 billion to Pakistan’s central bank.
“I want to thank the UAE govt for supporting Pakistan so generously in our testing times. This reflects our commitment and friendship that has remained steadfast over the years,” he tweeted.
“The Abu Dhabi Fund for Development” said, in a statement, “it is to deposit the said amount in the coming days to enhance liquidity and monetary reserves of foreign currency at the Bank.”
Foreign Minister Shah Mehmood Qureshi also hailed the development and thanked the Crown Prince of Abu Dhabi for the generous financial support.
“We thank Crown Prince H.H @MohamedBinZayed for his generous financial support of US$ 3 Billion. This is a manifestation of the close fraternal ties between Pakistan & UAE which have always stood the test of time,” Qureshi tweeted.
“The addition of this amount will help boost foreign exchange reserves and contribute to strengthening Pakistan currency. It will also aid the success of ongoing home-grown stabilization programme of the present government,” a statement issued by the Ministry of Finance said.
According to WAM, “The UAE’s support for Pakistan’s fiscal policy is based on the historical ties between the two people and the two friendly countries and the desire to further develop the bilateral cooperation in all fields.”
It mentioned that the Abu Dhabi Fund for Development had financed eight development projects in Pakistan with a total value of AED1.5 billion, including AED 931 million in grants. The funds covered projects in sectors such as energy, health, education and roads.
On December 14, Pakistan received the second tranche of $1 billion from Saudi Arabia after which the country’s foreign exchange reserves stood at $8.26 billion.
The deposit was confirmed by the central bank, which said it will receive the third instalment in mid-January. The first $1 billion from Saudi Arabia were received in November.
Pakistan is also hoping the United Arab Emirates will offer further financial support through deferred oil payments, Information Minister Fawad Chaudhry told Reuters hours after the UAE announcement to lend $3 billion to shore up Pakistan’s foreign reserves.
Chaudhry declined to disclose the sum of assistance through deferred oil payments, but said this was part of the discussions that led to the UAE announcing it would deposit $3 billion with Pakistan’s central bank.
Pakistan is facing a widening balance of payments crisis. The rupee plunged almost five percent to a record low at the end of November, after what appeared to be a sixth devaluation by the central bank in the past year.
A team from the International Monetary Fund in November visited Pakistan for talks with officials on a possible IMF bailout but the discussions ended without any agreement.
Pakistan — a regular borrower from the IMF since the 1980s — last received an IMF bailout in 2013 to the tune of $6.6 billion.
Experts say that the deposit will ease pressure on Pakistan’s foreign currency reserves and the rupee, which has depreciated by 36 percent against the US dollar over the past 12 months.
Published in Daily Times, December 22nd 2018.
