Islamabad, Pakistan – Pakistan’s finance minister says the United Arab Emirates (UAE) has informed the International Monetary Fund (IMF) that it will provide financial support of $1bn to the crisis-hit South Asian country.
Ishaq Dar on Friday took to Twitter to make the announcement which paves the way for Islamabad to secure a crucial bailout package from the global lender amid an economic meltdown.
“UAE authorities have confirmed to IMF for their bilateral support of US $ One billion to Pakistan. State Bank of Pakistan is now engaged for needful documentation for taking the said deposit from UAE authorities,” Dar posted.
Pakistan is struggling to unlock a $1.1bn tranche from the IMF that has been delayed since November. A 10-day visit by the lender’s delegation in late January failed to break the deadlock, mainly over fiscal policy adjustments.
However, Lahore-based economist Hasaan Khawar expressed his scepticism at Dar’s announcement.
“Such announcements have come in the past by the finance ministry but over time, it has lost credibility in terms of what is going to happen. I really do hope for Pakistan’s sake that IMF programme does come through,” he told Al Jazeera on Friday.
The IMF says it needs assurances from Pakistan that its balance of payments deficit is fully financed for the financial year ending in June.
On Thursday, IMF chief Kristalina Georgieva expressed “hope” that Pakistan will complete the current loan programme.
“My hope is that with the goodwill of everyone, with the implementation of what has been already agreed by the Pakistani authorities, we can complete our current programme successfully,” she told reporters at the IMF headquarters in Washington, DC.
“We have been working very hard with the authorities in Pakistan within the context of our current programme to making sure that Pakistan has the policy framework that makes it possible to avoid what you’re talking about, to get to a point where debt of Pakistan may become unsustainable. We are not there yet, and it is better not to get there,” Georgieva added.
The IMF on Tuesday also predicted in its World Economic Outlook report that Pakistan will grow by just 0.5 percent in the current financial year, down from 6 percent in 2021-2022. It added that the country will face 27 percent inflation during the year.
Pakistan entered a $6bn IMF programme in 2019, which was expanded to $6.5bn last year. It last received a tranche of $1.17bn in August last year as part of a combined seventh and eighth review.
The global lender has put forward a set of demands for the latest loan package, including removing the artificial cap on the Pakistani rupee’s value in the market, removing subsidies, raising taxes, as well as providing guarantees from friendly countries of providing financial support.
Earlier this month, a top finance ministry official said the IMF has also received a commitment from Saudi Arabia regarding funding of $2bn for Pakistan.
The resumption of the IMF programme is critical for Pakistan’s struggling economy which has been wrecked by record-breaking inflation and an ever-declining foreign exchange reserve.
According to the latest figures by Pakistan’s central bank, the country’s foreign exchange reserves are just above $4bn, enough to cover four weeks of imports.
The Muslim-majority country is facing one of the worst economic crises in its 75-year history as food prices spiral out of control. Since the start of the holy month of Ramadan, more than 20 people have died due to stampedes at centres distributing free food to its most vulnerable people.
“If the IMF loan does not come, there is a high chance of default. But even with the programme, with the economy we have, there is no respite and things are only going to get worse for people in days to come. That said, not having the IMF programme is simply not an option for us,” economist Khawar told Al Jazeera.