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The UAE pledged $1 billion to boost Pakistan’s foreign reserves
Pakistan announced, on Friday, that the UAE and China pledged to provide financial support to it with a total value of $ 1.3 billion, in assistance that gives its ailing economy an outlet in the midst of its efforts to meet the conditions for resuming the International Monetary Fund’s rescue plan.
Pakistani Finance Minister Ishaq Dar said that the UAE has pledged to provide financial support of one billion dollars to boost Pakistan’s foreign exchange reserves, after they are now limited to 4.04 billion dollars, noting that this level barely covers import costs for four weeks.
On Friday, China liberated $300 million for Pakistan, the last tranche of a $1.3 billion loan whose effects were frozen, according to AFP.
“The UAE authorities have confirmed to the International Monetary Fund that they support Pakistan with one billion dollars,” Dar said in a tweet.
The minister indicated that the Central Bank of Pakistan is in the process of preparing the documents to receive the deposit.
Pakistan signed a bailout package of $6.5 billion with the International Monetary Fund in 2019, but it repeatedly failed to meet the conditions, and only $3 billion was released from the package.
The International Monetary Fund insists that the nuclear-armed country of 220 million people raise its ultra-low tax rates, end tax breaks for the export sector, and raise discounted prices for gasoline, electricity, and gas under the pretext of helping low-income families.
The country’s hopes are pinned on a new tranche of financing from the IMF, and on friendly countries renewing their existing loans or providing them with more support.
Faisal Shaji, chief strategist at Standard Capital Securities, said the latest funding appeared to put Pakistan “back on the path set by the International Monetary Fund”.
Shaji noted, “I am optimistic that IMF financing will now resume.”
The Pakistani economy is witnessing a collapse accompanied by a severe political crisis, a deterioration in the exchange rate of the rupee, and a rise in inflation to the highest level in decades, with additional pressures as a result of the devastating floods that swept the country and energy shortages.
The inflation rate on an annual basis reached 35.37% in March, the highest rate in nearly five decades, while the average inflation rate for the past year was 27.26%.
The South Asian country’s massive public debt, now at $274 billion, or about 90 percent of its gross domestic product, and the painstaking efforts to service it, make Pakistan particularly vulnerable to economic shocks.
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