ISLAMABAD: The United Arab Emirates is set to convert its existing $1 billion deposit with the State Bank of Pakistan into an equity investment in Fauji Foundation, a move expected to reduce Pakistan’s external liabilities while simultaneously increasing recorded foreign direct investment, according to sources familiar with the matter.
The proposed transaction would not affect Pakistan’s gross foreign exchange reserves, as the funds are already held with the central bank. Instead, it would reclassify the amount from an external liability into a long-term equity investment, offering balance-of-payments relief and strengthening economic ties between Pakistan and the UAE.
Earlier market speculation suggested that Fauji Foundation might divest significant stakes in its listed companies, particularly Fauji Fertilizer Company and Mari Energies, following remarks by Deputy Prime Minister Ishaq Dar. However, sources have clarified that these assumptions do not reflect the structure of the proposed deal and that no large-scale divestment of core assets is planned.
Fauji Foundation currently holds around 45 percent in Fauji Fertilizer Company and approximately 40 percent in Mari Energies. A sale of substantial portions of these holdings would materially dilute its ownership and control. People close to the matter indicated that the transaction is designed to avoid such outcomes and to preserve the foundation’s strategic interests.
Under the proposed structure, the UAE would convert the $1 billion SBP deposit into an equity stake in a newly created investment vehicle or trust, established jointly with Fauji Foundation. The UAE’s contribution would be in cash, while Fauji Foundation would inject assets of equivalent value through selected shareholdings in group companies, based on mutually agreed valuations.
According to sources, the assets under consideration may include stakes in Fauji Fertilizer Company, Askari Bank, Fauji Cement and other subsidiaries, while Mari Energies is not expected to be part of the transaction.
As part of the conversion process, the SBP would create the rupee equivalent of the $1 billion, estimated at around Rs280 billion, and transfer it to Fauji Foundation for deployment through the new investment vehicle. While Pakistan’s gross reserves would remain unchanged, the move would reduce external debt and liabilities by $1 billion and simultaneously increase reported FDI by the same amount.
If completed, the transaction would rank among the largest single foreign investments in Pakistan in recent years and is being viewed as an innovative way to strengthen external accounts while attracting long-term strategic capital.
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