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United Arab Emirates hands Pakistan US$6.2 billion lifeline, but ‘drastic economic reforms are still needed’

  • The package, which includes billions in deferred payments for oil supplies, was finalised during a meeting between the countries’ leaders on Sunday
PUBLISHED : Monday, 07 January, 2019, 10:38pm
UPDATED : Tuesday, 08 January, 2019, 10:50am

Pakistan is set to receive a US$6.2 billion lifeline courtesy of the United Arab Emirates, according to a senior government official in Islamabad.

The package, which will include US$3.2 billion of oil supplies on deferred payment, was finalised during a meeting between Abu Dhabi Crown Prince Sheikh Mohammed bin Zayed and Pakistani Prime Minister Imran Khan on Sunday, said the official, who was not authorised to speak publicly on the matter.

Pakistan’s Information Minister Fawad Chaudhry confirmed that Abu Dhabi would be making “huge investments” in the country, without specifying the amount.

“This includes the building of an oil refinery in Pakistan. An agreement on deferred oil payments has also been finalised and will be formally announced soon,” he said.

Abid ul Ghafoor, an official at the UAE embassy in Islamabad, said Abu Dhabi would set up a fund to invest in sectors such as oil, tourism and agriculture.

Pakistan has been trying to ward off a looming balance of payments crisis, after the rupee lost 25 per cent of its value against the US dollar in 2018.

Khan has approached Saudi Arabia, China and now Abu Dhabi for help, while Islamabad is also in talks with the International Monetary Fund for a rumoured US$7 billion bailout.

Pakistan secures further US$2 billion from China to ‘avoid crisis’

So far, Beijing has reportedly pledged to lend Pakistan US$4 billion, while Saudi Arabia has agreed to loan its South Asian ally US$6 billion.

A senior official at Pakistan’s Finance Ministry said: “Pakistan will accept every type of help from friendly countries including our strategic partner China and our Middle East friends.

“We will not disclose the amount we are going to receive from China ... as negotiations on key projects and financial packages are still under discussion. Both Beijing and Islamabad want to go ahead without disclosing details at the moment but will share details once they are finalised.”

Last month, the state-run Abu Dhabi Fund for Development said it would deposit US$3 billion in the State Bank of Pakistan to enhance liquidity and foreign currency reserves.

Sunday’s meeting was the third between Khan, who came to power last August, and Abu Dhabi’s crown prince.

Islamabad is likely hoping for further investment from the emirate’s other investment entities, such as the Abu Dhabi Investment Authority and sovereign wealth fund Mubadala, according to Osama Malik, an expert in international investment law.

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Zahid Hussain, a political analyst based in Islamabad, said the money “will be beneficial for short-term survival”, but added that “Pakistan still needs bold economic policies to [realise] drastic economic reforms for [its] long term benefit”.