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Tuesday March 19, 2024

UAE fund pledges $3 billion deposit to State Bank of Pakistan

By Our Correspondent
January 23, 2019

KARACHI: The Abu Dhabi Fund for Development (ADFD) on Tuesday pledged a much-awaited $3 billion through a deposit into the State Bank of Pakistan (SBP) to ease country’s foreign currency shortages.

Mohammed Saif Al Suwaidi, director general of ADFD, signed an agreement, outlining the terms of the deposit with Tariq Bajwa, SBP’s governor in the United Arab Emirates’ (UAE) capital Abu Dhabi.

Moazzam Ahmad Khan, ambassador of Pakistan to the UAE, Khalifa Al Qubaisi, deputy director general of ADFD, and other senior representatives of the two countries attended the signing ceremony.

“The directive to deposit $3 billion with the State Bank of Pakistan aligns with the UAE leadership’s keenness to bolster Pakistan’s economy, help its government achieve financial stability and overcome economic challenges, and drive comprehensive development in the country," UAE state news agency WAM reported Suwaidi as saying.

The deposit was announced in December on the directives of UAE President Sheikh Khalifa bin Zayed Al Nahyan, and Sheikh Mohamed bin Zayed Al Nahyan, crown prince of Abu Dhabi. The UAE deposit is aimed at supporting Pakistan’s economic growth and helping it achieve its monetary policy targets.

Sources said Pakistan will pay over 3 percent annual interest on the UAE fund’s deposit.

Pakistan has been facing an economic crisis due to depleting foreign exchange reserves and a widening current account deficit since the government of Prime Minister Imran Khan took office in August.

Latest SBP data; however, showed that the current account deficit shrank to $7.983 billion in the first six months of 2018/19, compared with $8.353 billion in the corresponding period last year.

The deficit in the first six months remained at 5.4 percent of the GDP.

The country is looking to bridge a gap of at least $12 billion caused by its latest balance-of-payments crisis and is currently negotiating a bailout package with the International Monetary Fund.

Prime Minister Khan has been shuttling between China, Saudi Arabia, and the UAE in an effort to secure bilateral funding from those allied nations.

In October last year, Saudi Arabia had announced a $6 billion bailout package for the country’s fragile economy, including a $3 billion deposit for its foreign currency reserves and another $3 billion in deferred oil payments

Deteriorating foreign currency reserves hit the rupee, which depreciated by almost 29 percent since December 2017. Foreign exchange reserves held by the SBP fell below $7 billion at the week ended January 11 due to external debt servicing

Suwaidi said ADFD and Pakistan have enjoyed strong and longstanding ties dating back to 1981. “The Fund’s efforts have significantly contributed to improving socioeconomic conditions in the country, boosting strategic growth and achieving the development priorities of the Pakistani government," he added.

SBP governor Bajwa, at the signing ceremony, praised the UAE leadership for their continued support to the people of Pakistan. The support from ADFD over the years has stimulated economic growth and contributed to sustainable development,” Bajwa said.

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