SBP says $1bln support fund received from UAE

KARACHI: State Bank of Pakistan (SBP) said on Thursday it had received $1 billion from United Arab Emirates (UAE) as part of a $3 billion support package to help boost the country’s dwindling liquid foreign currency reserves.

The Abu Dhabi Fund for Development (ADFD), earlier this week, pledged a much-awaited $3 billion through a deposit into the SBP accounts.

“USD one billion received from UAE,” SBP said in a tweet. “Amount received under an agreement signed on Tuesday, Jan 22, 2019 by governor SBP Tariq Bajwa and director general of Abu Dhabi Fund for Development.”

The country will receive another $2 billion in two separate installments in coming months.

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.

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.

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.

Officials said China had also agreed to lend $2 billion to Pakistan.

Deteriorating foreign currency reserves hit the rupee, which depreciated by almost 29 percent since December 2017.

With the arrival $1 billion from the UAE, the central bank’s foreign exchange reserves reached to $7.636 billion from a five-year low of $6.636 billion during the week ended on January 18. SBP reserves are constantly depleting due to large foreign debt repayments.

The central bank, in an earlier statement, said the foreign reserves held by the SBP declined by $265 million to $6.636 billion during the week ended on January18 due to external debt servicing and other official payments, the.

The reserves held by the country dropped to $13.257 billion during the week from $13.489 billion a week ago. Holdings of commercial banks, however, rose to $6.621 billion, compared with $6.588 billion in previous week.

Foreign reserves, at the current levels cover about one and a half months of the country’s import, regarded as a critically low level.