Pakistan has formally asked the United Arab Emirates to extend repayment of $2.5 billion in loans for two years. The request includes lowering interest rates by nearly half, covering a $450 million facility dating back 30 years. Prime Minister Shehbaz Sharif confirmed the rollover agreement during the UAE president’s recent visit, though the exact duration is still unclear.
The bulk of the debt, $2.45 billion, is maturing imminently, with $1 billion due this week and another $1 billion next week. Pakistan is negotiating to reduce the interest rate from 6.5 percent to about 3 percent. Officials cited improved credit ratings and lower global borrowing costs as justification for the request.
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Deputy Prime Minister Ishaq Dar said Pakistan owes $12 billion to friendly countries, including $5 billion to Saudi Arabia, $3 billion to the UAE, and $4 billion to China. The UAE previously extended $2 billion at 3 percent interest in 2018 but raised it to 6.5 percent last year. A $1 billion deposit was also made in 2023 under IMF conditions.
Pakistan’s external sector remains fragile, with exports down nearly 9 percent to $15.2 billion in the first half of the fiscal year. Foreign investment continues to lag, prompting the formation of a government committee to double exports from $32 billion to $63 billion in four years. Meanwhile, the World Bank stressed reforms in trade, capital markets, and state-owned enterprises.
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The government is also seeking World Bank support to refinance $36 billion in energy sector debt. A proposed plan would replace high-cost loans with cheaper multilateral financing, offering a 15-year repayment schedule and a four-year grace period. Officials hope this restructuring will lower electricity tariffs to Rs25 per unit, easing financial pressure on consumers.