Debt-ridden Pakistan gets a lifeline.
Debt-ridden Pakistan may breathe a wee bit easier, with $6.2 billion in financial assistance coming from the United Arab Emirates (UAE).
In a deal announced recently, after a meeting between Abu Dhabi Crown Prince Sheikh Mohamed Bin Zayed Al Nahyan and Pakistani Prime Minister Imran Khan, the UAE is committing $3 billion in cash for Pakistan, which is struggling to wriggle out of a balance-of-payments crisis. Another $3.2 billion would be in oil supply on a deferred-payment basis, easing Pakistan’s burden of meeting monthly oil-import bills.
This is the second critical deal clinched by Imran Khan’s government since parliamentary elections in July 2018. In October, Saudi Arabia pledged $6 billion—$3 billion in balance-of-payments support and another $3 billion in deferred payments on oil. Pakistan has also made efforts to secure commercial credit from China, a longtime ally currently on an infrastructure binge. Khan’s government had attempted to get over $8 billion in soft loans from the IMF, but negotiations seem to have fallen apart over the conditions likely to be imposed. The ruling party even floated the idea of selling bonds to overseas Pakistanis to mobilize quick cost-effective debt funds, but those plans have been put on hold.
The latest deal between the UAE and Pakistan, however, came as a surprise for many analysts, given strained relations between the two Muslim nations. Crown prince Al Nahyan was the first high-ranking official from the UAE to visit Pakistan in 12 years.
Apart from mobilizing debt, Khan’s government seems to be working on attracting investment from the UAE and Saudi Arabia. Investment framework agreements with the two countries are expected to yield over $10 billion in funding for projects. Haroon Sharif, chairman of Pakistan’s Board of Investment, says that Saudi Arabia’s flagship oil company, Aramco, proposes to invest $6 billion to $10 billion in a Pakistani oil refinery. UAE investors have committed to invest in housing and agriculture; while Chinese and Malaysian companies have shown interest in projects linked with meat, gemstones, information technology and high-tech education.