Clock ticking on $1b UAE cash facility

ISLAMABAD:

The United Arab Emirates (UAE) has not yet indicated that it wants to withdraw $1 billion cash support – maturing next week – to Pakistan.

The facility can be extended for one more year.

Moreover, Islamabad is set to repay the remaining $1 billion to Riyadh that is also maturing on the same day – January 24 – said sources in the Ministry of Finance.

The return of the third and final loan tranche of $1 billion to the kingdom would mark the end of the $6.2 billion financial support package that Riyadh had provided to the country for three years in October 2018.

The kingdom had withdrawn the $3.2 billion deferred oil financing facility in May last year and the cash assistance between July and January 2020-21. The original timeframe for returning the loan was 2022.

The UAE had also announced a $6-billion package for Pakistan. This included $3 billion in cash injection and another $3 billion in oil supply on deferred payments. It disbursed $2 billion cash but withdrew the oil financing facility.

The sources said the UAE $1 billion loan was maturing on January 24, with an option that the facility can be extended for one more year under the original deal. They said that the Gulf country has not yet intimated Pakistan to withdraw the loan.

“In case it does not withdraw the facility, the loan would be considered extended for one more year,” a senior finance ministry official told The Express Tribune on Friday.

The ministry did not officially comment on the matter. It was a “bilateral confidential matter”, said the finance secretary in a brief response.

The government was apprehensive that after Saudi Arabia’s decision to withdraw its bailout package, the UAE might also follow suit.

The sources said that Pakistan secured three different loans from China to return the Saudi debt, including the last tranche of $1 billion.

“Beijing gave $1 billion soft loan and two separate financing lines of $1.5 billion and $500 million to pay back the Saudi debt,” the sources told The Express Tribune.

After coming into power, Prime Minister Imran Khan had twice flown to Saudi Arabia to secure the package, which provided space to the first-timer PTI government to negotiate a deal with the IMF.

The government has also not been able to get the suspended $6 billion IMF programme restored. The PTI government is in the process of implementing two key conditions of introducing a mini-budget and increasing electricity tariffs.

The central bank’s gross foreign exchange reserves of $13.4 billion remain fragile, as these are largely built by taking loans.

The net short-term loans taken from the commercial banks amounted to $4.6 billion as of end November last year. The loans are double-booked in both the commercial banks reserves and the central bank gross reserves.