Pakistan receives first tranche of $3b support package pledged by UAE

Deposit part of $3b financial package aimed at stabilising forex reserves

KARACHI: Pakistan has received $1 billion in assistance from the United Arab Emirates (UAE), which is part of a $3-billion package announced by the Gulf Arab nation to support Pakistan's dwindling foreign currency reserves.

"$1 billion has been received from the UAE," tweeted the State Bank of Pakistan (SBP) on Thursday.

The amount was received under an agreement signed on January 22, 2019 by SBP Governor Tariq Bajwa and Abu Dhabi Fund for Development Director General Saif Al Suwaidi, it said.

SBP spokesman Abid Qamar said another $1 billion was expected from Saudi Arabia by the end of January 2019. The kingdom has already deposited $2 billion to provide vital cushion to Pakistan's reserves.

This would be the last tranche of the Saudi Arabian assistance package worth $3 billion agreed in October 2018.

Earlier, the SBP announced that Pakistan's foreign currency reserves dropped to a 57-month low of $6.63 billion as of January 18, 2019. With these reserves, Pakistan can hardly cover one-and-a-half-month of imports.



The reserves have continued to drop for the last two years due to the country's high foreign expenditure and low income, which is better known as the current account deficit.

The deficit was recorded at $8 billion in the first half (Jul-Dec) of the current fiscal year 2018-19, which was slightly lower than $8.4 billion in the same period of previous year.

In December, the UAE expressed the intention to deposit $3 billion in the SBP account. This assistance has improved Pakistan's position in terms of import payments and debt repayment in the short term.

"The deposits will help Pakistan achieve financial stability and overcome economic challenges," the Foreign Office tweeted after the agreement was inked with Abu Dhabi earlier this week.

Saudi Arabia has announced a financial package of $6 billion including $3 billion in cash and another $3 billion for the purchase of petroleum products on credit up to three years.

The credit line for oil supply is to be available from the current month, which will help Pakistan strengthen its international payment capacity.

Commenting on the latest UAE announcement, federal finance ministry spokesman Dr Khaqan Hassan Najeeb said, "This will leave a highly positive impact on Pakistan's economy; especially Pakistan's foreign currency reserves will get stabilised and the rupee will strengthen."

The government is running an economic stabilisation programme and the spokesman said "the (increased) reserves will assist a lot in meeting set objectives of the stabilisation programme".

An official said China was also expected to provide $3-4 billion in a similar package. A UAE news agency reported "the country's support for Pakistan's fiscal policy is based on historical ties between people of the two sides and the two friendly countries and the desire to further develop bilateral cooperation in all fields."