ISLAMABAD: The United Arab Emirates has rolled over $2 billion in loans to Pakistan for one month at the existing interest rate of 6.5%, officials said on Monday, as Islamabad seeks longer-term relief to ease pressure on its foreign exchange reserves.
Senior government and central bank sources said the UAE extended two separate $1 billion facilities that matured in mid-January, allowing additional time for negotiations on both the repayment period and the cost of borrowing. Pakistan is pushing for a two-year rollover and a reduced interest rate of around 3%.
The short-term extension marks a shift from previous annual rollovers granted by Abu Dhabi. Officials said discussions were continuing and another rollover request had been made, as immediate repayment would widen Pakistan’s external financing gap.
Under the ongoing $7 billion International Monetary Fund (IMF) programme, the UAE, Saudi Arabia and China have pledged to maintain a combined $12.5 billion in deposits with the State Bank of Pakistan (SBP) until the programme ends in September next year.
The UAE initially provided $2 billion to Pakistan in 2018, followed by an additional $1 billion in 2023, to help shore up reserves during periods of balance-of-payments stress. At the current rate, Pakistan pays about $130 million annually in interest on the UAE loans.
Prime Minister Shehbaz Sharif has publicly sought support from the UAE leadership for extended repayment terms, while the SBP has also requested a reduction in interest, citing improved credit indicators and softer global rates.
Despite a recent rise in foreign exchange reserves to about $16 billion, much of the increase reflects deposits from friendly countries, the prime minister acknowledged last week.
Pakistan’s external position remains fragile, with exports down nearly 7% in the first seven months of the fiscal year and foreign investment falling sharply, leaving the economy heavily reliant on loan rollovers and multilateral financing.