The United Arab Emirates is set to convert $1 billion held as deposits with the State Bank of Pakistan into an equity investment in Fauji Foundation, a move expected to reduce Pakistan’s external liabilities while increasing recorded foreign direct investment without altering the country’s gross foreign exchange reserves, BR reported, citing sources familiar with the matter.
Earlier, the market speculated, following remarks by Deputy Prime Minister Ishaq Dar, that the transaction would involve Fauji Foundation selling large stakes in its listed companies, particularly Fauji Fertilizer and Mari Energies. However, sources said this perception is inaccurate and does not reflect the structure of the proposed arrangement.
Fauji Foundation currently holds about 45% in Fauji Fertilizer Company and around 40% in Mari Energies, and a sale of nearly half these stakes would materially dilute its ownership and control. People close to the companies said the proposed transaction does not involve a major divestment of these core holdings.
Under the proposed structure, the UAE would commit $1 billion by converting its existing deposits with the SBP into an equity stake in a newly created investment vehicle or trust, to be set up as a joint arrangement with Fauji Foundation. The UAE’s contribution would be in cash, while Fauji Foundation would inject assets of equivalent value in the form of shareholdings in selected group companies, at mutually agreed valuations.
BR reported quoting sources as saying that the shares under consideration may include holdings 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, 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 fund. While gross reserves would remain unchanged, the transaction would reduce external debt and liabilities by $1 billion and simultaneously raise Pakistan’s reported FDI by the same amount.Â
If completed, the transaction would rank among the largest single foreign investments in Pakistan in recent years.
