Pakistan has almost overcome its current account deficit as generous financial assistance extended by the friendly countries has not only reduced the current account deficit and bolstered the foreign exchange reserves but also restored the confidence of both the domestic and international businessmen in sustainability of Pakistani economy. Resultantly, Pakistani shares jumped 3.3 percent in early trade helped by an aid pledge from Saudi Arabia that emerged from the Future Investment Initiative in Riyadh. Saudi Arabia pledged $3 billion in support to Pakistan and allowed for up to $3 billion in deferred oil payments to help stave off a budget crisis. The deal came as Pakistani Prime Minister Imran Khan attended the opening of the Future Investment Initiative in Riyadh.
Earlier Khan met with King Salman and Crown Prince Mohammed bin Salman to discuss bilateral issues. It was his second visit to the Kingdom in just over a month. It was agreed Saudi Arabia will place a deposit of $3 billion for a period of one year as balance of payment support,” Pakistan’s foreign ministry said in a statement. It was also agreed that a one year deferred payment facility for import of oil, up to $3 Billion, will be provided by Saudi Arabia. This arrangement will be in place for three years, which will be reviewed thereafter.
During his address to the gathering of global business executives, Khan also confirmed that Pakistan was in talks with the International Monetary Fund (IMF) for a new bailout. Pakistan is seeking foreign aid to help plug a massive budgetary gap which the Pakistan prime minister has blamed on the mismanagement of the previous administration.
In October this year, several far-reaching decisions on bilateral economic and financial cooperation were reached during the discussions held between Pakistani and Saudi officials: It was agreed that Saudi Arabia will place a deposit of US $3 billion for a period of one year as balance-of-payment support. A memorandum of understanding (MoU) was signed in this regard between Finance Minister Asad Umar and his Saudi counterpart Muhammad Abdullah Al-Jadaan. It was also agreed that a one-year deferred payment facility for import of oil, up to $3 billion, will be provided by Riyadh. This arrangement will be in place for three years, after which it will be reviewed.
Saudi Arabia also confirmed its interest in investing in a petroleum refinery in Pakistan. An MoU for this project will be signed after obtaining the cabinet’s approval. The Kingdom also expressed interest in the development of mineral resources in Pakistan. In this regard, the federal government will hold consultations with the Balochistan government, following which a Saudi delegation will be invited to Pakistan to finalise matters.
Saudi Arabia’s USD 6 billion assistance package has eased pressure on Pakistan’s foreign exchange reserves and exuded confidence that the country will emerge stronger and more prosperous in the coming years. Riyadh s gave Pakistan USD 3 billion in foreign currency support for a year and a further loan worth up to USD 3 billion in deferred payments for oil imports.
The government was in contact with two other friendly countries for more financial assistance. People should not worry as the difficult time would pass and Pakistan will emerge as a much stronger and prosperous country in the coming years. A high-level UAE delegation arrived in Pakistan on October 26 to discuss investment opportunities, while Khan will visit China in the first week of November to seek business and investment as well as explore financial assistance.
The Saudi financial package strengthened Pakistan’s bargaining position in case the government approached the International Monetary Fund (IMF) for a bailout. Even if the government was forced to seek IMF assistance, it would not need as much money as it would have needed in absence of the Saudi assistance.
In late December, the United Arab Emirates announced to deposit US$3 billion (equivalent to AED11 billion) in the State Bank of Pakistan to support the financial and monetary policy of the country. The Abu Dhabi Fund for Development said, in a statement today, that it will deposit the said amount in the coming days to enhance liquidity and monetary reserves of foreign currency at the bank. The country’s support for Pakistan’s fiscal policy is based on the historical ties between the two people, said WAM, and the two friendly countries and the desire to further develop the bilateral cooperation in all fields.
Following the announcement, Prime Minister Imran Khan took to Twitter to thank the UAE government for supporting Pakistan so generously in our testing times. This reflects our commitment and friendship that has remained steadfast over the years, said the prime minister.
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. 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 PTI-led government, which completed its 100 days in power on November 26, counted resetting relations with key partners including Saudi Arabia and the UAE among its accomplishments in its performance report. Since assuming office in August, the premier has visited the UAE twice. The first visit took place in September when Khan visited Saudi Arabia and then the UAE. He was received by Crown Prince of Abu Dhabi Sheikh Mohammed bin Zayed bin Sultan Al Nahyan and the two countries had agreed to strengthen economic, trade and investment relations.
The next month, a UAE delegation comprising CEOs/senior officials of major companies including Mubadala Petroleum, ADIA (Sovereign Wealth Funds), Etisalat, DP World, Dubai Investment Authority, Emaar Properties, Aldahra Agriculture and Abu Dhabi Fund for Development arrived in Pakistan. According to Foreign Minister Shah Mahmood Qureshi, the one-day visit of the delegation headed by Dr Sultan Aljaber, minister of state and CEO of Abu Dhabi National Oil Company was a follow-up to the prime minister’s maiden visit to Abu Dhabi.
In November, the premier embarked on his second trip to the UAE amid reports that the gulf state was ready to extend financial assistance to Pakistan. Khan was received by the Abu Dhabi crown prince in the UAE capital and was accorded a reception at the presidential palace, which was followed by delegation-level talks.
Feeling the pulse the iron brother of Pakistan also took the initiative and now China is expected to deposit $2 billion in Pakistan reserves during the month of December and more importantly the economic diplomacy with the UAE is also going to show some results as UAE is likely to provide financial assistance as well. According to a report Pakistan is likely to receive financial assistance from China and UAE this month. During the month of January 2019, the country is most likely to attain a $6 billion facility.
China will deposit $2 billion and will most likely do it in one go. However, China wants Pakistan not to highlight its assistance for strengthening the reserves. Apart from that, Pakistani authorities are also in process to finalize the purchase of 15 billion RMBs (Yuan) at a commercial rate. The expected relief from China in December and from the UAE in January next year will provide huge comfort to the PTI government.
Moreover, the official said that the latest statement by Finance Minister Asad Umar about Pakistan not being in a hurry for the IMF bailout package indicates that impending relief from China and UAE to support the foreign reserves is on the cards. Asad Umar was aware that things are moving with China and UAE in a positive trajectory and behind-the-scenes talks with both the countries have matured indicating that China and UAE are all set to come forward to bail out Pakistan from the current economic morass.
Pakistan has already got $2 billion out of $3 billion promised by Saudi Arabia to strengthen the foreign exchange reserves. According to State Bank of Pakistan, the country will get the remaining $1 billion from Saudi Arabia in the month of January 2019.