Steadying the fiscal ship

Before jetting off to the United Arab Emirates, Crown Prince of Abu Dhabi Sheikh Muhammad bin Zayed Al Nahyan on Sunday handed Pakistan a substantial financial assistance package, almost identical to the one Saudi Arabia had announced in October 2018, to bolster the nation’s depleting state coffers. The prince, who was here on a day-long visit, his first in nearly 12 years, met Prime Minister Imran Khan and key cabinet members as both countries seek to cash in on the fresh momentum in ties due to a flurry of recent contacts at the leadership level. Top officials of the two countries had sat down last week to discuss the nitty-gritty of a $6.2 billion support package for Islamabad to help tackle the acute balance of payments crisis.

A joint statement issued after the UAE royal’s visit said Prime Minister Khan thanked the crown prince for the ‘generous’ balance-of-payments support of $3 billion, which appears to have materialised first out of the total financial package. While details are likely to filter through over the coming days, one report suggests the new support package is by and large of the same size and comes with the same strings attached as the one offered by Riyadh. With this, Pakistan would get a total saving of about $7.9bn on oil and gas imports from the two friendly countries — accounting for more than 60 per cent of annual oil import bill of about $12-13bn, according to a cabinet member. This includes about $3.2bn each of oil supplies on deferred payments from the UAE and Saudi Arabia and about $1.5bn trade finance from the International Islamic Trade Finance Corporation (ITFC). The total financing support from the UAE and Saudi Arabia, including the ITFC’s trade finance, would be around $13.9-14bn when cash deposits of $3bn each from the two countries were also included. Amid the dire straits that Pakistan’s economy found itself in when the new government of Imran Khan had assumed office, these heart-gladdening developments should lift the drooping spirits of the Q Block, the seat of finance ministry. With the steadying of the fiscal ship, the country could well navigate the turbulent waters ahead.

Published in The Express Tribune, January 7^th, 2019.

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