According to sources, Pakistan is getting closer to winning a loan from the International Monetary Fund (IMF) as the United Arab Emirates (UAE) is expected to promise the global lender that it will deliver a $1 billion loan to help the country avoid default by this week.
According to reports, the UAE is expected to give a written guarantee for $1 billion in financing this week, and the news will be delivered to Fund officials by Finance Secretary Hamed Yaqoob Sheikh during the annual meeting presently taking place in Washington.
The IMF has requested that Pakistan obtain assurances on external financing from friendly countries and multilateral partners in order to bridge the balance of payment gap for the current fiscal year, which ends in June.
Saudi Arabia offered $2 billion last week and informed the IMF that it will give finance to Pakistan. However, the agreement with the IMF is still contingent on the UAE making a comparable pledge for a $1 billion loan.
According to Ministry of Finance sources, matters have been resolved with the UAE, and the IMF will receive confirmation as soon as Pakistan receives a written guarantee from the Gulf state.
The news comes after Prime Minister Shehbaz Sharif and Finance Minister Ishaq Dar asked UAE officials to fulfil the Fund’s criteria.
The cash-strapped nation of 220 million people is experiencing one of its worst economic crises in history, with interest rates reaching an all-time high as consumer prices accelerated to a new peak.
IMF lowers growth forecast
Meanwhile, the IMF has reduced its growth forecast for the country to 0.5% from 2% previously, citing a dollar shortage that has caused supply chain delays and enterprises to cease production.
The Fund is also evaluating the coalition government’s proposed fuel discount for lower-income groups, which it proposes to fund by hiking fuel costs for wealthier motorists; nevertheless, the finance minister stated that the IMF has been provided with all necessary information.
Dar, who cancelled his travel to Washington where he was expected to meet with IMF officials on the sidelines, has repeatedly promised that a staff-level deal with the Washington-based lender will be reached shortly; nevertheless, these statements have proven to be worthless.
Since late January, Islamabad has hosted an IMF mission to negotiate a series of policy steps to secure $1.1 billion in finance for the cash-strapped economy, which is on the point of collapse.
The funds are part of a $6.5 billion bailout package approved by the IMF in 2019, which analysts believe is vital for Pakistan to avoid defaulting on external payment obligations.
The agreement will also open up additional bilateral and multilateral finance channels for Pakistan, allowing it to shore up its foreign exchange reserves, which have slumped to four weeks’ worth of import cover, and help it avoid a balance of payment crisis.