The United Arab Emirates has rolled over $2 billion of Pakistan’s debt for one month at an interest rate of 6.5%, offering temporary relief to the country’s foreign exchange position as negotiations continue for a longer-term arrangement. The short extension covers two loans of $1 billion each that matured in mid-January, easing immediate repayment pressure while discussions on revised terms remain ongoing.
According to officials familiar with the matter, the two loans matured on January 16 and January 22 and were extended for a one-month period to allow Pakistan additional time to negotiate the tenor and pricing of the rollover. Islamabad is seeking to convert the short-term extension into a two-year rollover at an interest rate of around 3%, which would significantly reduce debt servicing costs and improve external financing stability.
Government officials indicated that preparations are underway for another formal request to the UAE, noting that repayment of the full $2 billion at this stage would create a sizeable financing gap. Such a gap would have to be filled through alternative sources, adding pressure to Pakistan’s already constrained external accounts.
The rollover is particularly important in the context of Pakistan’s ongoing $7 billion programme with the International Monetary Fund. Under the programme, key bilateral partners including the UAE, Saudi Arabia and China have committed to maintaining a combined $12.5 billion in deposits with the State Bank of Pakistan until the IMF arrangement concludes in September next year. These deposits play a critical role in supporting Pakistan’s foreign exchange reserves and overall macroeconomic stability.
Officials noted that this is the first time the UAE has granted only a one-month rollover, marking a departure from the annual extensions provided in previous years. In the past, Pakistan has relied on year-long rollovers after being unable to repay the principal amounts at maturity. The unusually short extension has heightened expectations that clarity on the final maturity period and interest rate will emerge in the coming days.
In December, the governor of the State Bank of Pakistan had formally requested the UAE to roll over $2.5 billion for a period of two years while also seeking a substantial reduction in the interest rate. Subsequently, Prime Minister Shehbaz Sharif raised the matter directly with the UAE leadership, stating publicly that a rollover had been agreed, though specific terms were not disclosed at the time.
The UAE initially extended $2 billion to Pakistan in 2018 for a one-year period. Since then, Pakistan has depended on repeated rollovers of the facility due to persistent external financing pressures. An additional $1 billion loan was extended in 2023 to help meet financing requirements linked to the IMF programme.
The latest one-month rollover provides short-term breathing space, but the outcome of ongoing negotiations will be crucial for Pakistan’s external financing outlook. A longer-term rollover at lower interest would help ease pressure on reserves, reduce debt servicing costs, and support economic stability in the months ahead.
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