UAE Rolls Over $2 Billion Loan to Pakistan for One Month

The United Arab Emirates (UAE) has rolled over $2 billion in debt for one month at the existing interest rate of 6.5%, as Pakistan continues to hope for a better deal from the Gulf nation to avoid pressure on its foreign exchange reserves, federal government officials said on Monday.

Highly placed sources in the federal government and the central bank told The Express Tribune that the UAE rolled over two loans of $1 billion each, which matured on January 16 and 22. They said the debt was rolled over for one month to allow time for further discussions on the tenor and interest rate. Pakistan seeks a two-year rollover and an interest rate of around 3%.

A State Bank of Pakistan (SBP) spokesperson did not respond to a request for confirmation . The Finance Ministry, which is responsible for meeting external financing requirements to the satisfaction of the International Monetary Fund (IMF), also did not reply to queries.

The officials said that another request was being made to roll over the debt, as its repayment would create a financing gap that would need to be filled from other sources.

Under the $7 billion IMF programme, the UAE, Saudi Arabia and China have committed to maintaining their combined $12.5 billion in cash deposits with the SBP at least until the programme expires in September next year.

However, this is the first time the UAE has extended the debt repayment period by only one month, unlike the previous practice of granting one-year extensions. Officials said the situation regarding the tenor and maturity of the debt would become clearer in the coming days.

In December, SBP Governor Jameel Ahmad had requested the UAE government to roll over $2.5 billion in debt for two years and cut the interest rate by almost half.

Subsequently, Prime Minister Shehbaz Sharif also requested the UAE president to extend the repayment period. The prime minister said the UAE had agreed to roll over the debt, but did not provide further details.

A central bank source said Pakistan had sought a two-year extension and a reduction in the interest rate by more than half.

The UAE provided $2 billion to Pakistan in 2018 for one year, but Pakistan was unable to repay the amount and has sought rollovers annually since then. Later, the UAE extended another loan of $1 billion in 2023 to help Pakistan meet external financing requirements for an IMF bailout.