*ISLAMABAD - Pakistan economy faces a $3.2 billion setback as Pakistan* has not been able to secure $3.2 billion oil on deferred payments facility from the United Arab Emirates (UAE).
“Most probably, the UAE oil facility agreement will not materialise,” Finance Minister Asad Umar on Wednesday confirmed to *The Express Tribun**e* .
But he hastily added that the government has made alternative arrangements to meet its external financing needs for this fiscal year.
The reasons for cancellation of the $3.2 billion oil facility by the UAE could not be immediately ascertained. Last month, the UAE had also postponed a scheduled meeting of the Joint Ministerial Commission.
The $3.2 billion oil facility was part of the $6.2 billion that the UAE had announced to give to Pakistan in December to help the country passing through difficult economic times. The UAE has already transferred $2 billion cash into the coffers of the State Bank of Pakistan (SBP) and another $1 billion was expected very soon.
During the visit of UAE crown prince, Pakistani authorities had hoped that the crown prince would announce the $3.2 billion credit oil facility following the same model of Saudi Arabia. Later on, the February deadline was given that was also missed.
It will be a setback for the Finance Ministry that had declared fully bridging the financing gap on back of $14.5 billion financial support from the UAE , Saudi Arabia and China. So far, only Saudi Arabia has given $3 billion in cash and its oil facility on deferred payments has also been finalised.
The development came amid a delay in finalisation of an agreement with the International Monetary Fund (IMF). The negotiations with the IMF are continued since October last year.
Two ($2) billion dollar loans are also expected from China next week, said the Finance Ministry that tried to downplay the cancellation of $3.2 billion UAE oil facility.
The $3.2 billion UAE oil facility was expected to take the pressure off from the foreign exchange market besides stabilising the official foreign currency reserves. Pakistan arranged $3 billion cash from Saudi Arabia at 3.2% interest rate.
The UAE cash support has been secured for a period of two years at an interest rate of 3%, according to a written reply that Asad Umar submitted in the Senate last week.