ISLAMABAD: Pakistan has formally requested the United Arab Emirates (UAE) to roll over approximately $2.5 billion in maturing debt for a period of two years and reduce the applicable interest rate by more than half, as the country looks to ease near-term pressures on its external account, according to sources cited by The Express Tribune.
The request was made around the time of the recent visit of the UAE president to Pakistan. Prime Minister Shehbaz Sharif later informed the federal cabinet that Abu Dhabi had agreed in principle to extend the repayment period, although he did not clarify whether the rollover would be for one year or two. Government and central bank officials said Pakistan has officially sought a two-year extension, along with a reduction in the interest rate to around 3 percent.
Of the total amount, $2.45 billion is maturing this month. This includes $1 billion due on Friday and another $1 billion falling due next week. These UAE deposits form part of Pakistan’s foreign exchange reserves, which currently stand at around $16 billion. Any delay or non-rollover could place immediate pressure on the country’s reserve position.
Sources said the UAE had previously extended a $2 billion deposit to Pakistan in 2018 for a one-year period. At that time, the deposit carried an interest rate of about 3 percent. However, the rate was increased to around 6.5 percent last year amid global monetary tightening. Pakistan has now requested a return to lower interest rates, citing easing global financial conditions and what officials describe as an improvement in Pakistan’s credit outlook following macroeconomic stabilisation measures.
In addition to the $2.5 billion rollover request, Pakistan has also sought relief on a separate $450 million loan obtained from the UAE during 1996–97. This loan remains unpaid and continues to accrue interest at approximately 6.5 percent. Officials said the government has asked for a two-year extension on this obligation as well, arguing that repayment during the current International Monetary Fund (IMF) programme would be difficult.
Pakistan is currently operating under an IMF programme that runs until September next year, which places strict conditions on external borrowing and repayment management. Officials said any large outflows during this period could complicate programme targets and strain the country’s balance of payments position.
Earlier this week, Deputy Prime Minister and Foreign Minister Ishaq Dar stated that Pakistan still owes around $12 billion to friendly countries. This includes roughly $3 billion to the UAE, $5 billion to Saudi Arabia, and about $4 billion to China. Much of this financing has been rolled over in recent years to help Pakistan manage recurring external financing gaps.
Pakistan’s ability to manage its external account remains closely linked to continued support from bilateral partners and fresh inflows from multilateral lenders. While foreign exchange reserves have stabilised in recent months, they remain heavily dependent on rollovers of bilateral deposits.
At the same time, external inflows from other sources have remained weak. Exports declined by nearly 9 percent year-on-year to $15.2 billion in the first half of the current fiscal year, while foreign direct investment has stayed subdued. Officials acknowledge that without sustained growth in exports and investment, Pakistan will continue to rely on short-term financing arrangements to meet external obligations.
The outcome of Pakistan’s request to the UAE is expected to play a key role in shaping the country’s near-term external financing outlook and reserve position.
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