UAE breaks one-year precedent, rolls over $2b loan to Pakistan for just one month

2026-02-03 - 05:06

ISLAMABAD – The United Arab Emirates (UAE) has agreed to roll over a $2 billion loan to Pakistan for one month, maintaining the current interest rate of 6.5 percent, local media reports revealed on Tuesday. This loan, part of Pakistan’s total foreign exchange reserves of $16 billion, incurs an annual interest payment of $130 million at the current rate. Reports said this is the first time the UAE has agreed to a one-month extension instead of the usual one-year rollover. Previously, the UAE had extended loans to Pakistan for a period of one year. The two loans, each worth $1 billion, were due to mature on January 16 and January 22, respectively. The officials, according to repots, have confirmed that the UAE’s decision for a shorter rollover was made in response to ongoing discussions about the loan’s terms and interest rate. The Governor of the State Bank of Pakistan had previously sought a two-year extension with a reduced interest rate of 3%, following improvements in Pakistan’s credit rating and a decrease in global interest rates. Additionally, Prime Minister Shehbaz Sharif had requested the UAE President to consider extending the loan term. As Pakistan works to stabilize its foreign exchange reserves and avoid further pressure on its financial sector, the government remains hopeful that it can negotiate more favorable terms with the UAE. However, the situation remains fluid, and the final terms regarding the loan’s maturity and interest rate are expected to be clarified in the coming days. This loan rollover, which has been repeatedly extended since it was first issued in 2018 at a 3% interest rate, is seen as a critical component in Pakistan’s foreign sector stability. In 2023, the UAE had increased the interest rate to 6.5% when it extended an additional $1 billion loan to Pakistan. The stability of Pakistan’s external sector is heavily dependent on the rollover of existing loans, as well as new agreements with institutions like the IMF and the World Bank. Under a $7 billion deal with the IMF, Pakistan is expected to receive new cash inflows from the UAE, Saudi Arabia, and China, with a total of $12.5 billion pledged for deposit with the State Bank by September next year.