Govt’s economic team remains tight-lipped on geopolitical influence behind UAE's one-month debt rollover: report

During a meeting of the Senate Standing Committee on Finance, Pakistan's top economic team, including Finance Minister Muhammad Aurangzeb, SBP Governor Jameel Ahmad and FBR Chairman Rashid Mahmood Langrial, remained silent on whether geopolitical factors influenced the United Arab Emirates’ (UAE) decision to grant a one-month extension for $2 billion in debt repayment, The Express Tribune reported. 

Despite questions from the senators, the finance minister, along with the FBR chairman and the SBP governor, did not directly address why the UAE granted only a one-month extension instead of a longer period. However, the finance minister confirmed that all $12 billion worth of bilateral commitments with the UAE, Saudi Arabia, and China remained in place.

The Ministry of Finance referred a question on whether there were political reasons behind the one-month extension in the debt repayment to the Ministry of Foreign Affairs.

Aurangzeb assured that there was no shortfall in external financing, addressing questions raised by committee members about the UAE loan rollover. When asked whether the UAE had only agreed to a one-month rollover, the finance secretary dismissed the question as inappropriate.

Pakistan is seeking a two-year rollover for the debt and a reduction in the interest rate from 6.5% to around 3%. The UAE had previously agreed to roll over $2 billion in debt for one month after two loans of $1 billion each matured on January 16 and 22. 

The one-month extension is seen as providing time for further discussions on the terms of the debt, including the interest rate and repayment period.

In response to lawmakers’ concerns about potential business closures and financial strain caused by the super tax recoveries, the finance minister assured that the government was committed to the timely release of the next tranche of funds from the IMF. He also emphasised that successful negotiations during the IMF review would unlock critical financial support for Pakistan.

The finance minister also noted that Pakistan's external financing needs were being fully addressed, with ongoing discussions with the UAE, and highlighted the government’s plans to launch the Panda Bond within the first quarter of FY26. Additionally, he mentioned that the second meeting of the National Finance Commission would be held once all sub-group meetings were completed.

The UAE has been a key partner in Pakistan's financial recovery, contributing $3 billion in cash deposits to the State Bank of Pakistan as part of an arrangement with China and Saudi Arabia to provide combined support of $12.5 billion during the IMF’s Extended Fund Facility (EFF) program.

In related news, Pakistan is preparing for the third IMF review of its $7 billion bailout package, with talks scheduled for the end of February. If successful, Pakistan stands to receive a $1 billion fourth tranche and $220 million from the climate facility.