UAE rolls over $2 billion of Pakistan’s debt for one month at 6.5% interest rate: report

The United Arab Emirates (UAE) has rolled over $2 billion in debt owed by Pakistan for one month at an interest rate of 6.5%, easing immediate pressure on foreign exchange reserves while negotiations continue for longer-term relief, The Express Tribune reported.

Officials said two loans of $1 billion each, which matured on January 16 and January 22, were extended for one month to allow further discussions on the tenor and pricing. Pakistan is seeking a two-year rollover with an interest rate close to 3%.

Tribune cited government officials as saying that another request for rollover is being prepared, warning that repayment of the amount would create a financing gap that would need to be met from alternative sources.

Under the $7 billion IMF programme, 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 programme ends in September next year.

Officials noted that this is the first time the UAE has granted only a one-month extension, departing from earlier annual rollovers. They said clarity on the maturity and interest rate is expected in the coming days.

In December, SBP Governor Jameel Ahmad had requested the UAE to roll over $2.5 billion for two years and reduce the interest rate by nearly half. Prime Minister Shehbaz Sharif later also raised the issue with the UAE president, stating that a rollover had been agreed, without disclosing terms.

The UAE initially extended $2 billion to Pakistan in 2018 for one year. Pakistan has since relied on annual rollovers after being unable to repay the amount. An additional $1 billion loan was extended in 2023 to help meet IMF-related external financing needs.