ISLAMABAD: Pakistan has formally requested the United Arab Emirates (UAE) to extend the repayment period of a $2.5 billion loan and significantly reduce its interest rate, according to official sources.
The request was made during the recent private visit of the UAE President to Pakistan. Following the meeting, Prime Minister Shehbaz Sharif stated that the UAE had agreed to roll over the loan, although detailed terms were not disclosed.
Sources from the federal government and the State Bank of Pakistan (SBP) revealed that the total outstanding amount under discussion is $2.45 billion. Of this, $1 billion matured on Friday, while another $1 billion is set to mature next week.
Pakistan was not in a position to repay the amount immediately, prompting the request for an extension.
Pakistan has sought a two-year extension along with a reduction of the interest rate by more than half. The loan package also includes $450 million borrowed nearly 30 years ago, which continues to carry an interest rate of 6.5 percent.
In 2018, the UAE had provided Pakistan with $2 billion for one year, which currently forms part of the country’s $16 billion foreign exchange reserves. Officials indicated that repayment during the ongoing IMF programme would be difficult, which is why a longer rollover period has been requested. The IMF programme is scheduled to conclude in September next year.
Meanwhile, the World Bank has expressed concern over Pakistan’s low investment levels, stating that they fall short of targets set under the $20 billion Country Partnership Framework (CPF). A World Bank delegation met Finance Minister Muhammad Aurangzeb, emphasizing the need for a results-based strategy, clear policy objectives, and technical assistance.
Deputy Prime Minister Ishaq Dar also disclosed that Pakistan owes $12 billion to friendly countries, including $5 billion to Saudi Arabia, $3 billion to the UAE, and $4 billion to China.
The State Bank of Pakistan and the Ministry of Finance had not issued an official response by the time the report was filed regarding the final terms of the UAE loan extension.
