Islamabad: The UAE has confirmed financial support of $1 billion to Pakistan, the South Asian nation’s finance minister said, removing a key hurdle to securing a much awaited bailout tranche from the IMF. The commitment is one of the IMF’s last requirements before approving a staff-level pact to release a tranche of $1. 1 billion, delayed for months, that is crucial for Pakistan to resolve an acute balance of payments crisis.
“The State Bank of Pakistan is now engaged for needful documentation for taking the said deposit from UAE authorities,” finance minister Ishaq Dar said, referring to the central bank. The pledge makes the UAE the third country, after Saudi Arabia and longtime ally China, to come to Pakistan’s assistance, as external financing is needed to fully fund the balance of payments gap for the fiscal year that ends in June.
“The UAE deal should be helpful because the IMF has been saying Pakistan should secure financing from ‘friendly’ nations,” said Seaport Global EM credit analyst Himanshu Porwal. “The IMF is saying that they (Pakistan) are in breach of certain targets. The fiscal deficit for example is seen peaking at around 8. 3% (of GDP), so almost double what they were expecting,” he added. The IMF programme will disburse another tranche of $1. 4 billion to Pakistan before it concludes in June. Funds will also unlock other bilateral and multilateral financing for the cash-strapped country.