UAE has confirmed to IMF $1bn deposit for Pakistan: Dar

ISLAMABAD: The confirmation given by the United Arab Emirates (UAE) on additional $1 billion deposits to the IMF and the re-financing of a $300 million commercial loan from China have paved the way for striking a staff-level agreement with the IMF.

Two much-awaited developments occurred on external financing needs of Pakistan’s struggling economy as the UAE gave its confirmation on $1 billion deposits to the IMF and Islamabad also received $300 million re-financing commercial loans from Chinese Bank on Friday, which would help Islamabad secure revival of the IMF programme.

Pak authorities are now pining hopes that the staff-level agreement was expected to be struck next week after which the IMF’s Executive Board might take up Islamabad’s request for the completion of the 9th review and release of a $1 billion tranche next month under the $6.5 billion Extended Fund Facility (EFF).

“UAE authorities have confirmed to IMF for their bilateral support of US$1 billion to Pakistan. State Bank of Pakistan is now engaged for needful documentation for taking the said deposit from UAE authorities. AlhamdoLilah” Minister for Finance Ishaq Dar tweeted on Friday.

On Chinese commercial loan refinancing, Dar stated that “one of Chinese Bank’s ICBC approved facility of $1.3 billion (which was earlier repaid by Pakistan) State Bank of Pakistan would receive back third and last disbursement today in its account amounting to $300 million. It will shore up forex reserves of Pakistan”.

The sources said that the Chinese loan of $300 million has been provided to the State Bank of Pakistan, helping Islamabad to jack up its foreign exchange reserves that stood at just over $4 billion at the moment.

Kingdom of Saudi Arabia has already given its confirmation to the IMF for provision of additional $2 billion deposits and it is expected that some positive announcement is expected next week.

Pakistan and the IMF held physical parleys for completion of 9th review here in Islamabad from January 31 to February 9, 2023 and Minister for Finance had expressed his hopes that the staff level agreement might be struck within next few days. However, two months passed without achieving success despite implementing tough measures under the prescriptions given by the IMF under EFF conditions. The government had unveiled Rs 170 billion revenue through imposition of mini budget, hiked electricity tariff for erasing monster of circular debt, raise gas tariff, jacked up policy rate up to 21 per cent, increased POL prices, Petroleum Development Levy up to Rs 50 per litre and allowed massive adjustments of market based exchange rate. All these measures were done but the IMF had linked striking of staff level agreement with getting assurances on fulfilling external financing needs which according to the assessment of the IMF stood at $6 billion till end of June 2023. The IMF asked Islamabad to manage $3 billion prior to signing of the staff-level agreement out of which now $2 billon and $1 billion were confirmed by Saudi Arabia and UAE respectively. It was hoped that the revival of the IMF program would help securing the remaining $3 billion from the multilateral creditors including the IMF, World Bank, AIIB and commercial banks from China and Dubai. The cross-fuel subsidy still remains another stumbling block in the way for striking agreement with the IMF. The Pak authorities have given assurances to the IMF that no such scheme would be implemented without taking the IMF into confidence.