DUBAI: The United Arab Emirates (UAE) has pledged a significant investment of $10 billion in Pakistan, a much-needed boost for the financially strained South Asian nation.
The commitment was made during Prime Minister Shehbaz Sharif’s meeting with UAE President Sheikh Mohamed bin Zayed Al Nahyan in Abu Dhabi, where the premier is currently on a day-long visit.
Pakistan’s economy has been grappling with financial challenges, prompting the government to seek investments from friendly nations. In addition to the UAE’s promise, Saudi Arabia has also pledged to expedite $5 billion in investment. Furthermore, Prime Minister Sharif emphasized during his visit that Pakistan is no longer reliant on “begging bowls” when seeking assistance from brotherly countries.
Despite a comfortable foreign exchange reserve position of $14.5 billion as of May 17, Pakistan is still in need of additional financial support. While the completion of a short-term $3 billion program helped prevent sovereign default last month, the government is advocating for a fresh, longer-term program to address ongoing fiscal challenges.
Although Pakistan’s economy has stabilized, with inflation decreasing to around 17% in April from a record high of 38% last May, it continues to face significant fiscal deficits. Import control mechanisms have helped manage the external account deficit but have resulted in stagnant growth, projected to be around 2% this year compared to negative growth last year.
In light of these challenges, Pakistan is seeking at least $6 billion from the International Monetary Fund (IMF) and is requesting additional financing from the Fund under the Resilience and Sustainability Trust. However, the IMF has communicated to Pakistani authorities that any bailout package under the Extended Fund Facility (EFF) would only be considered after presenting an aligned upcoming budget and securing parliamentary approval. This underscores the importance of fiscal discipline and structural reforms in Pakistan’s pursuit of economic stability and growth.
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