As the UAE is set to pledge cash shortly, Pakistan draws closer to reaching an IMF agreement.
This week, the UAE is set to provide a formal assurance to the IMF.
According to reports, agreements have been reached with UAE officials.
The finance secretary will update IMF authorities on the situation.
ISLAMABAD: According to sources cited by Geo News, United Arab Emirates (UAE) is set to convince the international lender that it will offer a $1 billion finance to help the country avoid a default by this week, bringing Pakistan’s loan from the International Monetary Fund (IMF) closer to being approved.
According to the sources, the UAE is set to give a formal guarantee for a $1 billion loan this week, and the Finance Secretary Hamed Yaqoob Sheikh will inform Fund officials during the annual conference presently taking place in Washington.
In order to close its balance of payment imbalance for this fiscal year, which ends in June, the IMF has requested Pakistan to get guarantees on external finance from allies and multilateral partners.
Saudi Arabia notified the IMF last week that it will finance Pakistan with a $2 billion promise. The agreement with the IMF is still dependent on the UAE making a similar pledge to lend them $1 billion.
Sources close to the Ministry of Finance acknowledged that agreements had been reached with the UAE, and the IMF would be informed as soon as Pakistan obtains a formal guarantee from the Gulf nation.
The new development followed requests made to UAE authorities by Prime Minister Shehbaz Sharif and Finance Minister Ishaq Dar for the completion of Fund criteria.
With interest rates at an all-time high as consumer prices accelerated to a new record, the 220 million-person country is in the midst of one of its worst economic crises ever.
As a result of the country’s currency shortage, which has caused supply chain delays and company production shutdowns, the IMF has reduced its growth prediction for the nation from 2% to 0.5%.
The coalition government’s plan to raise petrol costs for rich drivers while offering lower income groups a fuel discount is also being evaluated by the IMF, despite the finance minister’s claim that the IMF has already been given the necessary information.
Dar has often asserted that the staff-level agreement with the Washington-based lender will be reached in the near future; however, the assertions have proven to be unhelpful. Dar postponed his travel to Washington where he was set to attend in-person discussions with the IMF officials on the sidelines.
Since late January, Islamabad has been the home of an IMF mission negotiating a number of policy changes to win $1.1 billion in aid for the struggling economy, which is on the point of collapse.
The money is a part of a rescue package of $6.5 billion that the IMF authorised in 2019, which analysts believe is essential for Pakistan to avoid defaulting on its responsibilities for foreign payments.
The agreement would also open up more bilateral and multilateral funding options for Pakistan, which will assist it stabilise its foreign exchange reserves, which have decreased to only four weeks’ worth of import coverage, and help it avoid a balance of payment crisis.