*ISLAMABAD – Pakistan economy faces a $3.2 billion setback as Pakistan* hasnot been able to secure $3.2 billion oil on deferred payments facility fromthe 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 arrangementsto meet its external financing needs for this fiscal year.
The reasons for cancellation of the $3.2 billion oil facility by the UAEcould not be immediately ascertained. Last month, the UAE had alsopostponed a scheduled meeting of the Joint Ministerial Commission.
The $3.2 billion oil facility was part of the $6.2 billion that the UAE hadannounced to give to Pakistan in December to help the country passingthrough difficult economic times. The UAE has already transferred $2billion cash into the coffers of the State Bank of Pakistan (SBP) andanother $1 billion was expected very soon.
During the visit of UAE crown prince, Pakistani authorities had hoped thatthe crown prince would announce the $3.2 billion credit oil facilityfollowing the same model of Saudi Arabia. Later on, the February deadlinewas given that was also missed.
It will be a setback for the Finance Ministry that had declared fullybridging the financing gap on back of $14.5 billion financial support fromthe UAE, Saudi Arabia and China. So far, only Saudi Arabia has given $3billion in cash and its oil facility on deferred payments has also beenfinalised.
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The development came amid a delay in finalisation of an agreement with theInternational Monetary Fund (IMF). The negotiations with the IMF arecontinued since October last year.
Two ($2) billion dollar loans are also expected from China next week, saidthe Finance Ministry that tried to downplay the cancellation of $3.2billion UAE oil facility.
The $3.2 billion UAE oil facility was expected to take the pressure offfrom the foreign exchange market besides stabilising the official foreigncurrency reserves. Pakistan arranged $3 billion cash from Saudi Arabia at3.2% interest rate.
The UAE cash support has been secured for a period of two years at aninterest rate of 3%, according to a written reply that Asad Umar submittedin the Senate last week.
