In a much-needed boost to its struggling economy, Pakistan secured a combination of bailout packages this week, including $3 billion from the International Monetary Fund (IMF), $2 billion from Saudi Arabia, and $1 billion from the United Arab Emirates (UAE). This financial assistance is aimed to address Pakistan’s balance of payments crisis and provide stability to its economy.
The IMF’s board approved a $3 billion, nine-month Stand-By Arrangement (SBA) for Pakistan, providing a crucial lifeline for the country.
“Today, the Executive Board of the International Monetary Fund (IMF) approved a 9-month Stand-By Arrangement (SBA) for Pakistan for an amount of SDR 2,250 million (about $3 billion or 111 percent of quota) to support the authorities’ economic stabilization program,” the lender wrote on its website.
The disbursement of the funds will be done in phases, with an initial immediate disbursement of SDR 894 million (around $1.2 billion). The SBA will support Pakistan’s economic stabilization program and help address both domestic and external imbalances.
$3 Million Collective from Saudi Arabia and UAE
Additionally, Pakistan received significant financial support from Saudi Arabia and the UAE. Saudi Arabia deposited $2 billion into the State Bank of Pakistan (SBP).
Finance Minister Dar expressed his gratitude to the Saudi leadership on Tuesday for depositing $2 billion in the State Bank of Pakistan (SBP). He acknowledged that this substantial deposit would have a twofold effect, bolstering the country’s reserves and contributing to overall economic stability.
Meanwhile, the UAE’s commitment to Pakistan’s economic recovery was confirmed through a $1 billion deposit in the State Bank’s account
“We received the confirmation some time ago that our brother country, our friend, the UAE has deposited $1bn to the State Bank’s account. The Federal Reserves Bank has confirmed that this amount has been credited to the [SBP’s] account,” Dar said in a video message broadcast live on television.
Later, he also tweeted the development.
Finance Minister Ishaq Dar further noted that with the Saudi Arabian deposit, Pakistan’s central bank reserves had increased by $3 billion in just two days.
The financial assistance from Saudi Arabia and the UAE arrived ahead of a crucial meeting of the IMF’s Executive Board, where the $3 billion standby arrangement for Pakistan was expected to be approved. These timely deposits helped solidify Pakistan’s position and underscored the confidence of its international partners in its economic revival efforts.
Prime Minister Shehbaz Sharif also expressed gratitude to the UAE President, Mohammed bin Zayed Al Nahyan, recognizing the UAE as a steadfast friend and brotherly country.
“We deeply acknowledge this kind gesture & consider it critical to our efforts to stabilize the economy,” PM Sharif wrote on Twitter.
PM Sharif emphasized the significance of this support in stabilizing Pakistan’s economy and acknowledged the kindness of the gesture.
Pakistan’s dire financial situation prompted concerns of a potential default on its obligations. However, the approved bailout package brings relief to the South Asian nation, offering a policy anchor to address fiscal adjustment, debt sustainability, and critical social spending. The program will also focus on restoring a market-determined exchange rate and strengthening foreign exchange market functioning.