UAE to deposit $3 billion in SBP

ISLAMABAD: The United Arab Emirates (UAE) on Friday announced to provide $3 billion deposits for the State Bank of Pakistan (SBP) for improving Pakistan’s dwindling foreign currency reserves.

In addition, the provision of $3 billion oil facility on deferred payment is expected to be finalised by next month from the UAE as negotiations are underway on this front.

However, Pakistan has also been conveyed plainly by both Saudi Arabia and the UAE that the support from bilateral donors should not be considered as substitute to the IMF program, rather it must be treated as complementary to the Fund programme for Pakistan.

“I want to thank the UAE govt for supporting Pakistan so generously in our testing times. This reflects our commitment and friendship that has remained steadfast over the years,” Prime Minister Imran Khan stated on Twitter after announcement from the UAE.

Exactly one month after the visit of Imran Khan, the UAE announced to deposit $3 billion (equivalent to AED11 billion) in the SBP to support its financial and monetary policy, Emirates News Agency reported. The Abu Dhabi Fund for Development said it will deposit the amount in the coming days to enhance liquidity and monetary reserves of foreign currency at the central bank.

The Abu Dhabi Fund for Development has financed eight development projects in Pakistan with a total value of AED1.5 billion, including AED931 million in grants. The funds covered projects in sectors such as energy, health, education and roads.

The Finance Ministry Spokesman, Dr Khaqan Najeeb, said the facility of $3 billion for deposits into the SBP will help the country to ensure stabilisation in its exchange rate. He said the current account deficit had contracted and reduced by 10.6 percent in the first five months of the current fiscal compared to the same period of the last financial year.

Pakistan has submitted draft Memorandum of Economic and Financial Policies (MEFP) to the IMF and projected that external financing requirement would be available to keep the overall foreign currency reserves at over $14 billion.

According to envisaged plans, four major avenues have been identified as they projected $4 billion from unidentified avenues during the current fiscal year. There are expectations that China is going to provide more dollar inflows within the current financial year so the government has projected the total inflows of $4 billion in the shape of unidentified avenues.

The second projected dollar inflows has been envisaged in shape of Monetary Authorization Deposits to the tune of $6 billion during the ongoing FY-2019. Saudi Arabia committed $3 billion for provision of oil on deferred payment and also promised $3 billion deposits for the SBP out of which $2 billion was already provided to Pakistan and remaining $1 billion was expected to be received by next month. The UAE has now announced same amount of package including $3 billion oil and remaining $3 billion for deposits.

Minister for Finance Asad Umar had told that Saudi Arabia made provision of $3 billion at rate of 3.18 percent. Pakistani authorities projected $700 million through launch of international bond but it was not yet ascertained that what type of international bond the government wanted to launch to attract multimillion dollars from the potential investors. The PTI-led government was eyeing to fetch $500 million from the IMF with the expectation that the Fund programme would be approved and Islamabad would be able to draw first tranche.

The Finance Ministry has estimated that the government will have to pay $6.5 billion in shape of amortisation of foreign loans and liabilities during the current fiscal year. The government has projected that China will provide $1.983 billion as bilateral loan during the current fiscal year.

The authorities in Beijing do not want its assistance to be highlighted at a large scale for ‘reasons.’ The oil facility from the UAE will help Pakistan have the oil deferment of $6 billion in toto as $3 billion oil facility has already been extended by Saudi Arabia. The amount of $2 billion from Saudi Arabia has been deposited in the country’s reserves and $1 billion will be deposited in January. The amount of $8 billion will be deposited in the country’s reserves which Pakistan authorities cannot use for any purpose.

Dr Khaqan Najeeb said the amount will help build up foreign exchange reserves and contribute in strengthening the Pak Rupee. It will also aid the success of ongoing home-grown stabilisation programme.

The official said the $8 billion to be deposited by Saudi Arabia, UAE and China will just provide the authorities in Pakistan a mere sense of confidence and nothing else. However, Pakistan will be able to say to IFIs (international financial institutions) and other economies that it has sizeable foreign exchange reserves.

Factually, the $6 billion oil facility from both Saudi Arabia and UAE will help Pakistan come out of US dollar pressure. And more importantly, the expected deal with the IMF factually will help Pakistan wriggle out of economic mess as the government direly needs the comfort letter to maintain the ties with World Bank, ADB and other donor agencies. Unless and until Pakistan gets the letter of comfort from IMF, it cannot have loan particularly for budgetary support from IFIs. Without comfort letter, Pakistan will not be able to generate the amount from international market.

Meanwhile, Prime Minister Imran Khan said the establishment of Islamabad National University (INU) at the PM House will set the country’s direction right in terms of human development. Speaking at the launch conference for INU at the PM House, Imran Khan said the money to be recovered from the looters and plunderers would be diverted towards education and human development. He said conversion of the PM House into a university had the prime objective of promoting education, particularly higher education.

“It also aims at eliminating the colonial mindset and elite style of living which the colonial rulers used to rule the people,” he maintained. Imran said the government was focusing on education and human development and following the model of the State of Madina, wherein education was given top priority. He said the Holy Prophet (Peace Be Upon Him) after the victory of Ghzwa-e-Badr offered the war prisoners that if any of them would educate 10 persons, they would be set free and pointed out that it reflected what importance was given to education in the Islamic state.

Imran cited the example of renowned Caliph Haroon Rashid, who attracted many intellectuals of that era into the Baitul Hikma (House of Wisdom), which he had established for research. The prime minister said he also envisioned such a centre of excellence at the PM House for interaction of scholars from home and abroad. Imran said his government would provide funds to universities and research institutions for raising the standard of education in the country. The prime minister said no country or nation could achieve progress and prosperity without focusing on education and human development. He pointed out that China and Singapore made major economic development through quality education.

Imran Khan also urged the youth to raise their voice if they notice misuse of the tax money. Addressing the event, Chinese Ambassador to Pakistan Yao Jing said Pakistani government was taking steps for improvement of education. He said China was prepared to cooperate in promotion of education in Pakistan. He lauded Prime Minister Imran Khan and said he had taken revolutionary steps for progress and prosperity of the country.