In a significant development, the United Arab Emirates (UAE) has announced an allocation of $10 billion for further investments in Pakistan, according to a statement from the Prime Minister’s Office on Thursday. This decision comes as Pakistan, facing financial challenges, seeks foreign investment to bolster its economy.
The announcement was made during Prime Minister Shehbaz Sharif’s meeting with UAE President Sheikh Mohamed bin Zayed Al Nahyan in Abu Dhabi, where the Prime Minister is on a day-long visit.
The UAE’s WAM news agency reported that the decision was made to “strengthen the Pakistani economy, support it, and enhance cooperation between the two countries.”
The government statement elaborated: “President of the UAE, His Highness Sheikh Mohammed bin Zayed Al Nahyan made a commitment of investing US $10 billion in multiple sectors in Pakistan.”
Pakistan is actively seeking investment from friendly nations to uplift its economy, with the PML-N-led government exploring avenues to bolster reserves and tackle high inflation.
Saudi Arabia has also pledged to expedite $5 billion in investment, as per federal ministers. Last month, the kingdom’s foreign minister expressed Saudi Arabia’s intention to “move ahead significantly” with investment projects in Pakistan.
During his inaugural visit as elected Prime Minister, Shehbaz Sharif emphasized Pakistan’s pursuit of collaboration with friendly nations, declaring an end to the era of approaching brotherly countries with a “begging bowl.”
As of May 17, Pakistan’s total foreign exchange reserves stand at a comfortable $14.5 billion, with the State Bank of Pakistan holding reserves of $9.15 billion after a slight increase.
Last month, Pakistan concluded a short-term $3 billion program, averting sovereign default. However, the government is advocating for a fresh, longer-term program.
Pakistan narrowly avoided default last summer, and its $350 billion economy has stabilized post the completion of the last IMF program, with inflation dropping to around 17% in April from a record high of 38% in May last year.
Despite progress, Pakistan faces a significant fiscal shortfall. While it has managed its external account deficit through import control mechanisms, growth remains stagnant, projected at around 2% this year compared to negative growth last year.
Pakistan is seeking at least $6 billion and additional financing from the IMF under the Resilience and Sustainability Trust. However, the IMF has indicated that the next bailout package under the Extended Fund Facility (EFF) will only be considered after presenting an aligned upcoming budget and securing approval from parliament.
