Pakistan Seeks UAE’s Help to Extend $2 Billion Loan Repayment

Pakistan has requested the United Arab Emirates (UAE) to roll over a loan of $2 billion that is due to mature this month, as the country faces a tight foreign exchange situation and seeks to avoid a balance of payments crisis.

According to sources in the finance ministry, caretaker Prime Minister Anwaar-ul-Haq Kakar has written a letter to UAE President Mohamed bin Zayed Al Nahyan, seeking his support for the rollover of the loan.

The loan was part of a $3 billion deposit that the UAE had made with the State Bank of Pakistan (SBP) in 2022 to help the country cope with a balance of payments crisis. The deposit was made at an interest rate of 3% for the first $1 billion and 6.5% for the remaining $2 billion.

The sources said that the first $1 billion of the deposit had already been rolled over by the UAE last year, and Pakistan was hopeful that the same would be done for the second $2 billion, which is due to mature on January 17 and 20.

“The Prime Minister’s Office and the Ministry of Finance are working on the issue and we are optimistic that the UAE will extend the loan repayment period,” the sources said.

The rollover of the loan is crucial for Pakistan, as it would help the country maintain its foreign exchange reserves, which stood at $8.221 billion as of December 29, the highest level in more than five months.

The reserves, however, are still below the required level of three months of import cover, and the country needs more inflows to meet its external debt obligations and import payments.

Pakistan is also expecting to receive $700 million from the International Monetary Fund (IMF) on January 11, after the completion of the first review of its $6 billion loan program.

The IMF has recently confirmed that its Executive Board would consider Pakistan’s request for the completion of the first review and the release of the second tranche of the loan on January 11 in Washington.

Pakistan had fulfilled all the prior actions and performance criteria required by the IMF for the first review, and was confident of getting the loan tranche. Pakistan was in talks with other friendly countries, such as China and Saudi Arabia, to secure more financial assistance and investment, sources revealed.

Pakistan has already received $1 billion each from China and Saudi Arabia as part of their respective $3 billion deposits with the SBP.

The sources said that Pakistan was grateful to its allies for their continued support and cooperation, and hoped to strengthen its economic ties with them in the future.

Back to top button