ISLAMABAD — In a significant boost to its fragile economy, Pakistan has received confirmation from the United Arab Emirates (UAE) that a $2 billion financial support deposited in its central bank will be extended for another year, the State Bank of Pakistan announced on Thursday.
This extension of financial aid, which consists of two $1 billion deposits, is pivotal as it aids Pakistan in maintaining its foreign exchange reserves. This support is critical as it helps stabilize the Pakistani rupee and secures ongoing financial assistance from the International Monetary Fund (IMF). The deposits, originally set to mature in January 2025, will now be renewed for an additional year.
Pakistan’s economy, valued at around $350 billion, has historically been trapped in cycles of economic instability. In an effort to break this pattern, the country entered into a $7 billion, 37-month loan agreement with the IMF in September of the previous year. The continuation of this program is scheduled for review in February.
The decision to roll over the loan deposits follows a meeting between Pakistani Prime Minister Shehbaz Sharif and UAE President Sheikh Mohamed bin Zayed Al-Nahyan in Rahim Yar Khan, Pakistan. During this encounter, the UAE president agreed to the extension of the financial support, which was a significant topic of discussion in subsequent cabinet meetings led by Prime Minister Sharif.
The UAE ranks as Pakistan’s third-largest trading partner, following China and the United States, and is a crucial source of foreign investment and remittances, thanks to over a million Pakistani expatriates residing in the Gulf country. According to the UAE foreign ministry, the bilateral investment from the UAE exceeds $10 billion over the last two decades.
Further strengthening their economic ties, Pakistan and the UAE signed multiple cooperation agreements worth over $3 billion last year. These agreements, which were signed during the World Economic Forum in Davos, encompass sectors such as railways, economic zones, and infrastructure.
As of January 10, Pakistan’s foreign exchange reserves were reported at $16.45 billion, with $11.73 billion held by the State Bank of Pakistan. In addition to UAE’s support, Pakistan has also historically relied on external financing from other key allies like Saudi Arabia and China, which has been essential in meeting the conditions for IMF financial assistance.
