In a move aimed at alleviating Pakistan’s economic woes, the United Arab Emirates (UAE) has pledged an additional $10 billion investment in the South Asian nation. The promise came during a meeting between Pakistan’s Prime Minister Shehbaz Sharif and UAE President Sheikh Mohamed bin Zayed Al Nahyan in Abu Dhabi, the capital of the Gulf state.
Pakistan, grappling with financial difficulties, is actively seeking foreign investment to bolster its economy. The cash injection from the UAE follows similar commitments from other friendly nations. Saudi Arabia, for instance, has vowed to accelerate $5 billion in investment, signaling growing support from regional partners.
The financial situation in Pakistan has been precarious, with the government of Prime Minister Shehbaz Sharif striving to shore up reserves and combat high inflation. Despite recent strides, challenges persist. While the country’s foreign exchange reserves reached $14.5 billion as of May 17, the State Bank of Pakistan-held reserves stand at $9.15 billion, showing only modest growth.
Last month, Pakistan successfully concluded a short-term $3 billion program, staving off the specter of sovereign default. However, officials emphasize the need for a more substantial, longer-term solution. The International Monetary Fund (IMF) has been a key player in Pakistan’s economic stabilization efforts, with the country narrowly avoiding default last summer.
While Pakistan’s economy has shown signs of stabilization, significant hurdles remain. Inflation, which soared to a record high of 38% last May, has moderated to around 17% as of April. However, fiscal deficits persist, and growth remains stagnant, projected to hover around 2% this year, a marked improvement from negative growth last year.
To address these challenges, Pakistan is seeking at least $6 billion in additional financing from the IMF under the Resilience and Sustainability Trust. However, the IMF has outlined conditions for further assistance, including the presentation of an aligned upcoming budget and securing parliamentary approval.
As Pakistan navigates its economic recovery, the influx of investment from the UAE and other allies offers a glimmer of hope for the nation’s financial future.
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