UAE President Sheikh Mohammed bin Zayed Al Nahyan has promised an additional $1 billion on top of the existing $2 billion loan.
On January 19, the Abu Dhabi Development Fund (ADFD) deposited $2 billion in the State Bank of Pakistan (SBP). According to Pakistan Finance Minister Ishaq Dar. Prime Minister Shehbaz Sharif spoke with UAE President Sheikh Mohammed bin Zayed Al Nahyan about the contract extension during a recent visit to Pakistan.
According to Geo News, the President of the UAE has promised to provide an additional $1 billion loan to the existing $2 billion loan. The UAE’s financial aid has provided some comfort to Pakistan, which is still recovering from nationwide flooding that has cost more than $30 billion.
SBP currently has foreign exchange reserves of $4.5 billion, equivalent to three weeks’ worth of earnings accounts at the central bank. According to the bank, SBP’s foreign exchange reserves have fallen to $4.3 billion, which is not enough to generate income for three weeks.
External financing is essential for Pakistan’s fragile economy as the International Monetary Fund’s (IMF) ninth round of review to authorize a $1.1 billion transfer to Pakistan has stalled since September. According to the bank, commercial banks’ net foreign exchange reserves were $5.8 billion and total liquidity reserves were $10.1 billion.
In September 2022, Sharif said that even his allies view Pakistan as a country that continually seeks financial aid. Before the floods, Pakistan’s economy was already at risk, Sharif said. He argued that the situation became much more complicated after the flood. He added that when Pakistani officials visit friendly countries or talk on the phone, people assume Pakistan is there to ask for money.
Sharif claimed Pakistan was on the verge of default when he took office in April 2022, but said the coalition government’s efforts had stopped him and at least partially brought the economic chaos under control.