According to a statement issued by the Pakistani prime minister’s office, the existing $2 billion loan would be supplemented with a $1 billion loan.
According to the Pakistani prime minister’s office, the United Arab Emirates has pledged a $1 billion loan to cash-strapped Pakistan and has also agreed to roll over a $2 billion existing loan as a support for the South Asian country dealing with an economic crisis.
The declaration was made during a meeting between the UAE President Sheikh Mohamed bin Zayed Al Nahyan and Pakistani Prime Minister Shehbaz Sharif on Thursday in Abu Dhabi, the capital of the UAE. This was Sharif’s third trip to the Gulf nation since assuming office in April.
According to a PMO statement, the two presidents “decided to enhance the investment cooperation, boost partnerships, and facilitate investment integration prospects between the two nations.”
Since gaining power, Sharif has struggled to get the economy moving again; his first finance minister, Miftah Ismail, unexpectedly left his position last September.
Islamabad is seeking financial support from its close allies, notably Saudi Arabia, China, and the UAE, while Pakistan negotiates for the next tranche of loans from the International Monetary Fund (IMF).
Ismail said that the decision to renew the fund is “excellent news for Pakistan,” and some experts viewed the development as a much-needed reprieve for the nation, whose central bank’s foreign reserves had fallen to less than $4.5 billion, or about one month’s worth of imports.
Economy in Danger
Pakistan’s fragile economy will receive timely help from the increased money, according to economist Ammar Habib Khan of Islamabad.
The World Bank revised its estimates for GDP growth to a 2 percent rate on Wednesday. The government has been obliged to take drastic measures due to the severe economic situation, such as closing malls and restaurants early.
Due to a stalemate between the two sides, Pakistan has had difficulty persuading the IMF to disburse the next tranche of $1.1 billion in loans.
The country has to agree to the lender’s several requirements, such as raising energy costs and broadening the tax base, in order to get the financing. In 2019, Pakistan enrolled in an IMF program, and the final $1.17 billion tranche was disbursed in August of the previous year.
Due to Pakistan’s reliance on bilateral aid, some analysts cautioned against donor weariness.
In October, Saudi Arabia made a $3 billion deposit with the Pakistan Central Bank. According to sources, Saudi Crown Prince Mohammed bin Salman has urged the Saudi Fund for Development to consider making a $2 billion further investment.