Pakistan has successfully secured financial aid from the UAE and Saudi Arabia, equal to the loan preliminarily agreed upon by the International Monetary Fund (IMF).
Pakistani Prime Minister Shahbaz Sharif stated in a recent “Bloomberg” interview that the country would receive $1 billion in funding from the UAE within two days.
This funding supplements the $2 billion already deposited by Saudi Arabia in the State Bank of Pakistan following the preliminary agreement with the IMF for a loan program worth $3 billion. The IMF Executive Board is scheduled to meet today to vote on the loan.
The incoming funds alleviate pressure on the Pakistani government, which has been struggling to pay off its foreign debts totalling $25 billion for the current fiscal year. The financial aid will help ease the country’s dollar crisis and supply shortage, rescuing the economy before this year’s elections.
Pakistan’s foreign currency reserves have dropped by approximately 60% in the past twelve months to $3.5 billion as of mid-June. This decline has limited the country’s ability to finance imports, including raw materials, forcing many factories to suspend operations.
Credit rating agencies, Moody’s Investors Service and Fitch, predict that Pakistan will face persistent financing risks. Expectations are that the nation will need substantial additional funding, alongside IMF tranches, to meet its debt deadlines and finance economic recovery.
In South Asia, Pakistan has raised taxes and the prime interest rate to record levels and cut spending to secure an initial agreement with the IMF, which is still subject to Executive Board approval.
Pakistan previously received a loan of $1.1 billion in August, but the program was suspended due to Islamabad’s failure to meet certain conditions. The $25 billion debt repayment includes both principal and interest, which is seven times the foreign cash reserves held by Pakistan, according to Moody’s.
