UAE to deposit $3 billion in State Bank of Pakistan

The money will 'enhance liquidity and monetary reserves of foreign currency at the Bank'

ABU DHABI, UNITED ARAB EMIRATES - November 18, 2018: HH Sheikh Mohamed bin Zayed Al Nahyan Crown Prince of Abu Dhabi Deputy Supreme Commander of the UAE Armed Forces (R), meets with HE Imran Khan, PriShow more

The UAE will deposit $3 billion (Dh11 billion) in the State Bank of Pakistan to support the country's financial and monetary policy.

The Abu Dhabi Fund for Development said it will deposit the money over the next few days to enhance liquidity and monetary reserves of foreign currency at the Bank, reported state news agency Wam.

On Friday, Prime Minister Imran Khan thanked the UAE for its support.

"I want 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," he said in a tweet.

Foreign Minister Shah Mahmood Qureshi also thanked the UAE for its financial support. "We thank His Highness Sheikh Mohamed bin Zayed for his generous financial support of US$3 Billion. This is a manifestation of the close fraternal ties between Pakistan and UAE which have always stood the test of time," he said.

Pakistan's economic difficulties has led the country to devalue its currency five times, slashing its value by more than a quarter.

Islamabad is currently in talks with the International Monetary Fund to negotiate the country's potential 13th bailout since the early 1980s.

Last month, Pakistan's finance minister declared the country's economic crisis over. Asad Umar said that "Pakistan's immediate balance of payment crisis is over" without mentioning talks with the IMF. A final deal worth about $6bn is now expected by mid-January, according to local media reports.

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In October, Prime Minister Imran Khan visited Saudi Arabia and China and secured $6 billion (Dh22.04bn) in assistance from Riyadh while Beijing promised help to cover a projected $12bn shortfall in foreign exchange to service Pakistan's debt.

Analysts said the cash will give the economy breathing space and stabilise the rupee, which has fallen 25 per cent against the US dollar since December, but it will not solve Pakistan's balance of payments crisis and avert a second IMF bailout request since 2013.

Mr Khan visited the UAE last month and was received by Sheikh Mohamed bin Zayed, Crown Prince of Abu Dhabi and Deputy Supreme Commander of the UAE Armed Forces. It was Mr Khan's second visit to Abu Dhabi in three months.

Fawad Chaudhry, Pakistan’s minister of information, spoke on Friday of his country's gratitude to the UAE and of the warm relations between the two.

"Our government is working hard to fix the economic crisis. We are thankful to the Crown Prince of Abu Dhabi for his country's financial assistance to Pakistan," he told The National.

Reuters reported that Mr Chaudhry then said he hoped the UAE would offer further financial support by agreeing to defer oil payments.

Mr Chaudhry declined to disclose the sum of assistance through deferred oil payments but said this was part of the discussions that led to the UAE announcing deposit.

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Imran Khan's visit to the UAE in November:

Economic analysts in Pakistan said the deposit from the UAE would greatly help the country’s economy.

"The UAE financial help will bring stability in Pakistan's economy, and create trust among investors and will greatly improve foreign exchange reserves of the country," said Muhammad Sohail, chief executive of Topline Securities, a brokerage house.

"Pakistan still needs the IMF [bailout], as without IMF there will be no possibility of structural reforms in the economy. But after this financial amount the Khan government may delay the IMF program," he said.

Pakistan is one of the first countries to establish diplomatic relations with the UAE. The country's support for Pakistan's fiscal policy is based on the historical ties between the two peoples and the two friendly countries and the desire to further develop co-operation in all fields, reported Wam.

The deposit is the latest in a series of agreements and projects between the UAE and Pakistan with more planned over the next few years.

ADFD has financed eight development projects in Pakistan with a total value of Dh1.5bn, including Dh931 million in grants. The funds covered projects in sectors such as energy, health, education and roads.

In October, a high-level UAE delegation - headed by Dr Sultan Al Jaber, Minister of State and head of the Abu Dhabi National Oil Company - visited Pakistan to discuss a major bailout package to Islamabad.

Abu Dhabi government-owned Mubadala's Petroleum and Petrochemicals division is also finalising an investment decision on the planned Pak Arab Refinery in Pakistan by the end of 2019, a project that could cost up to $6 billion (Dh22.04bn).

"We are working with our Pakistani counterparts to progress on the engineering studies. We're expecting FID [final investment decision] in the near future. We're targeting end of 2019," the division's head Musabbeh Al Kaabi previously told The National.

In May, the UAE and Pakistan agreed to channel $200m into the UAE-Pakistan Assistance Programme. The move was ordered by President Sheikh Khalifa and Sheikh Mohamed bin Zayed to provide humanitarian aid to Pakistan.

The funds will be invested in provinces including Baluchistan and Khyber Pakhtunkhwa. The money will be invested into 40 projects covering roads, health, education, water and agriculture.

Home to nearly 1.6 million Pakistani residents, the UAE hosts one of the largest expatriate Pakistani community in the world. Their remittances from the UAE total about Dh1.59bn per year and the UAE exports goods worth $7.5bn to Pakistan annually whereas imports $869m worth of goods from Pakistan.