UAE Deposited $1 Billion into the SBP’s Foreign Currency Reserves

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UAE Deposited $1 Billion into the SBP's Foreign Currency Reserves

The United Arab Emirates (UAE), one of the top friendly countries, on Tuesday deposited a second tranche of $1 billion into the State Bank of Pakistan’s (SBP) foreign currency reserves to help ease international payment pressure on Islamabad.

“Yes, we have received $1 billion from the UAE,” SBP spokesman Abid Qamar confirmed to The Express Tribune.

The financial assistance came following the signing of an agreement on Saturday last week between the Abu Dhabi Fund for Development and the SBP for depositing the remaining $2 billion out of the committed $3 billion to shore up the central bank’s reserves.

Earlier, the UAE had announced a $6-billion package for Pakistan in December 2018 including $3 billion in cash deposit and a credit line of another $3 billion for the supply of petroleum oil on deferred payment.

The UAE has provided the soft loan at an interest rate of 3%, Finance Minister Asad Umar disclosed last week. Abu Dhabi released the first tranche of $1 billion in January 2019.

“We will let you know as and when the third and last tranche arrives,” Qamar added.

Modalities for the supply of oil to Pakistan on deferred payment are yet to be finalised, it has been learnt.

The finance minister also said the country was set to receive a total of $4.1 billion from the UAE and China during the week that started on Monday. China has committed to provide $2.1 billion at an interest rate of 2.5%.

The SBP reserves will swell to around $12 billion with the receipt of $4.1 billion. Total reserves of the country would surge to around $19 billion, including those available with commercial banks in Pakistan, he said.

The SBP reserves stood at $8.11 billion as on March 1, 2019, according to the central bank’s latest data.

“Deposits are coming at a very critical time as Islamabad is set to make a large external debt payment next month – April, while its reserves remain under pressure,” Arif Habib Limited Head of Research Samiullah Tariq said recently.

“Pakistan is scheduled to pay off $1 billion for a maturing Eurobond in April…this will be in addition to other external debt payments during the month,” he said.

The increased international payment pressure had led to depletion of Pakistan’s foreign currency reserves to almost five-year low at $6.63 billion as on January 18, 2019.

In December 2018, the UAE offered exactly the same bailout package as that announced by Saudi Arabia in October 2018 to shore up Islamabad’s foreign currency reserves.

Riyadh has already deposited $3 billion in cash in three equal monthly tranches by January 2019. Besides, the two countries have also decided modalities for oil supply on deferred payments from March 2019.

Source: Tribune