Pakistan has asked the United Arab Emirates (UAE) to roll over about $2.5 billion in maturing debt for two years and reduce the interest rate by more than half, as the country seeks to ease near-term external repayment pressures, The Express Tribune reported, citing sources from the central bank and government.
The request was made around the time of the UAE president’s recent visit to Pakistan. Prime Minister Shehbaz Sharif later told the cabinet that Abu Dhabi had agreed to extend the repayment period, though he did not specify whether the rollover would be for one year or two. Officials said Pakistan has formally sought a two-year extension along with a reduction in the interest rate to around 3 percent.
Of the total amount, $2.45 billion is maturing this month, including $1 billion due on Friday and another $1 billion falling due next week. These deposits form part of Pakistan’s foreign exchange reserves, which stand at around $16 billion.
Sources said the UAE had previously extended $2 billion in 2018 for one year. That deposit initially carried an interest rate of about 3 percent, which was raised to 6.5% last year. Pakistan has now requested a return to lower rates, citing improved credit conditions and easing global interest rates.
In addition, officials said Pakistan has also sought relief on a separate $450 million loan taken from the UAE in 1996–97, which remains unpaid and continues to accrue interest at around 6.5%. The government has requested a two-year extension, arguing that repayment during the current IMF programme, which runs until September next year, would be difficult.
Deputy Prime Minister Ishaq Dar said earlier this week that Pakistan still owes about $12 billion to friendly countries, including roughly $3 billion to the UAE, $5 billion to Saudi Arabia and $4 billion to China.
Pakistan’s ability to manage its external account remains closely tied to the rollover of bilateral deposits and fresh financing from multilateral lenders. Exports declined nearly 9 percent year-on-year to $15.2 billion in the first half of the current fiscal year, while foreign direct investment has remained subdued.