Finance Minister Ishaq Dar said on Friday that the United Arab Emirates has confirmed its commitment to the International Monetary Fund (IMF) for its bilateral financial support of $1 billion to Pakistan, bringing the country one step closer to securing a deal with the lender which is critical for avoiding default.
“UAE authorities have confirmed to IMF for their bilateral support of US $1 billion to Pakistan,” Dar said in a tweet today.
He added that the State Bank of Pakistan (SBP) was now “engaged for needful documentation for taking the said deposit from UAE authorities”.
Separately, Dar announced that the SBP would also receive today the third and last disbursement from the Industrial and Commercial Bank of China (ICBC) worth $300 million, out of its $1.3bn loan.
In a tweet, he said: “Out of Chinese bank’s ICBC approved facility of $1.3bn (which was earlier repaid by Pakistan), State Bank of Pakistan would receive back third and last disbursement today in its account amounting to $300mn.”
Today’s development is expected to lead to the much-delayed staff-level agreement (SLA) with the Fund and unlock multilateral disbursements. Since early February, Pakistan has been negotiating with the IMF to revive the $7bn bailout programme to secure a $1.1bn tranche.
With central bank reserves falling to critical levels, hovering around $4bn and barely able to cover a month of imports, the IMF tranche is critical for the country as it will also unlock other external financing avenues, helping Pakistan avert a default on its obligations.
Dar’s predecessor Miftah Ismail has said that UAE’s assurance to the IMF “paves the way for a staff-level agreement with the Fund”.
“Hopefully, board approval will follow in four weeks. This will reduce our default risk and demand for dollars (for capital flight),” he added.
Last month, Prime Minister Shehbaz Sharif had said that the lender wanted external financing commitments fulfilled from friendly countries before it released bailout funds. Several friendly countries such as Saudi Arabia, China and the United Arab Emirates, had made commitments to help Pakistan fund its balance of payments.
Subsequently, the state minister of finance had said that the Fund had received a commitment from Saudi Arabia regarding funding for Pakistan.
IMF chief ‘optimistic’ about Pakistan deal
Meanwhile, a day earlier, IMF said that it hoped to complete its current programme with Pakistan successfully.
“My hope is that with the goodwill of everyone, with the implementation of what has been already agreed by the Pakistani authorities, we can complete our current programme successfully,” IMF Managing Director Kristalina Georgieva said at a news briefing in Washington on Thursday.
Responding to a question about IMF-Pakistan talks for the revival of the 2109 loan package, Georgieva said: “We have been working very hard with the authorities in Pakistan within the context of our current programme to make sure that Pakistan has the policy framework that makes it possible to avoid what you are talking about.”
The reporter who asked the question had hinted at the possibility of Pakistan’s burgeoning debt becoming unsustainable.
But Georgieva said the purpose of the IMF-Pakistan talks was to avoid getting to a point where the country’s debt may become unsustainable. “We are not there yet and it’s better not to get there,” she said.
The IMF and Pakistani officials, she said, were also discussing how to support Pakistan “in terms of providing financial assurances so we can complete the programme”.
Observers pointed out that while the IMF chief ‘hoped’ that the talks would lead to the renewal of its package to Pakistan, she sounded less enthusiastic than Pakistani officials who have more than once assured their nation that they were close to clinching the deal.