ISLAMABAD - Prime Minister Imran Khan on Friday thanked the United Arab of Emirates (UAE) after it was reported that the brotherly Muslim country is going to help Pakistan in a big way through easing the unrelenting financial pressure.

The Abu Dhabi Fund for Development announced that it would deposit $3 billion (11 billion Dirhams) in the State Bank of Pakistan (SBP) in coming days to enhance liquidity and monetary reserves of foreign currency at the bank.

UAE’s official news agency WAM reported, “The UAE’s support for Pakistan’s fiscal policy is based on the historical ties between the two people and the two friendly countries and the desire to further develop the bilateral cooperation in all fields.”

Pakistan is one of the first countries to establish diplomatic relations with the United Arab Emirates.

Following the announcement, Pakistan Premier Imran Khan took to twitter to express his gratitude to the UAE.

“I want to thank the UAE government for supporting Pakistan so generously in our testing times,” he wrote.

“This reflects our commitment and friendship that has remained steadfast over the years,” Khan added.

The prime minister visited the UAE in November and met with Crown Prince of Abu Dhabi Sheikh Mohamed bin Zayed and Deputy Supreme Commander of the Armed Forces. It was his second visit to Abu Dhabi in three months since he assumed office in August.

The statement issued in UAE also mentioned that the Abu Dhabi Fund for Development had financed eight development projects in Pakistan with a total value of AED1.5 billion, including AED 931 million in grants. The funds covered projects in sectors such as energy, health, education and roads.

Foreign Minister Shah Mehmood Qureshi also thanked the UAE government. “We thank Crown Prince H.H Mohamed Bin Zayed for his generous financial support of US$ 3 Billion. This is a manifestation of the close fraternal ties between Pakistan & UAE which have always stood the test of time,” Qureshi tweeted.

Significance of UAE help

The UAE decision of deposit $3 billion in SBP account would help in enhancing the foreign exchange reserves, which are sharply declining due to repayment on previous loan and financing of current account deficit. The reserves held by the SBP would enhance to $11 billion with the inflow of $3 billion from UAE.

The deposit amount will help ease pressure on Pakistan’s foreign currency reserves and the rupee, which has depreciated by 36 percent against the US dollar over the past 12 months. The dollar surged up to a whopping Rs140 in December 2018 from Rs105 in November last year.

The UAE is the second country which has announced to deposit amount in the SBP account on the request of Pakistan’s prime minister. Earlier, Saudi Arabia had announced $6 billion package for Pakistan, which included placing $3 billion cash deposits in the account of State Bank of Pakistan. In addition, KSA would also provide a one-year deferred payment facility for the import of oil, worth up to $3 billion.

So far, $2 billion from Saudi Arabia had been received and another $1 billion would be available early next month (January). The loan had been made available at 3.18 percent return. The Saudi oil facility would also become operational early next month with a monthly supply worth $274 million.

The ministry of finance’s officials said that agreements with China are also at the final stage, which might be finalised within next two weeks or so. Pakistan had also sought financial help and market access from China. Sources informed that Pakistan is expecting to receive $2-$3 billion loan from the Chinese commercial banks.

“There will be no need of additional financing if China deposited $2 to $3 billion in the SBP,” said an official of the ministry of finance. He further said Finance Minister Asad Umar had already claimed that balance of payment crisis had ended.

Improvement in financial situation

The minister in early November had announced that balance of payment crisis had been overcome as Saudi Arabia and China equally filled a gap of $12 billion in its payments.

Pakistan is currently holding talks with the International Monetary Fund (IMF) for fresh loan programme. Asad Umar informed a parliamentary committee the other day that there was no urgency to approach the Fund for a bailout package because the $12 billion financing gap for the current fiscal year had been bridged with the help of friendly countries.

He also shared with the committee that the current account deficit had started to decline and it will ease the pressure on the foreign exchange reserves.

The current account deficit would likely touch $12 to $13 billion during this year, which earlier seemed to touch $24 billion, the minister explained. It had started reducing from two billion dollars a month to one billion dollars due to the measures taken by the government, he added.