ISLAMABAD: The United Arab Emirates has rolled over a $2 billion maturing loan to Pakistan for just one month, a move that has drawn attention within financial and policy circles amid ongoing pressure on the country’s foreign exchange reserves.
In this regard, the loan part of Pakistan’s total foreign exchange reserves of around $16 billion has been extended at the existing interest rate of 6.5 percent. At this rate, Pakistan pays approximately $130 million annually in interest on the facility.
This indicates the first time the UAE has rolled over the loan for only one month. Previously, such extensions were typically granted for a full year, making the short-term rollover a notable departure from past practice.
In this sense, federal government and State Bank of Pakistan (SBP) sources told that the UAE rolled over two separate loans of $1 billion each.
One tranche matured on January 16, while the second reached maturity on January 22. Both were extended for a period of one month to allow further discussions on the loan’s tenure and interest rate.
The temporary rollover is linked to ongoing negotiations. In December, the Governor of the State Bank of Pakistan formally requested the UAE to extend the loan for two years at a reduced interest rate of 3 percent, citing improvements in Pakistan’s credit outlook and easing global interest rates.
Subsequently, Prime Minister Shehbaz Sharif also raised the matter with the President of the UAE, seeking a longer repayment period. State Bank sources noted that the original $2 billion loan was extended by the UAE in 2018 at an interest rate of 3 percent and has since been rolled over multiple times.
In 2023, an additional $1 billion was provided, but at a higher rate of 6.5 percent, reflecting tighter global financial conditions.
The stability of Pakistan’s external sector, officials said, continues to depend heavily on the rollover of existing bilateral loans, as well as fresh inflows from institutions such as the International Monetary Fund and the World Bank.
