Pakistan has asked the United Arab Emirates (UAE) to roll over $2.5 billion in debt for two years and sharply reduce the interest rate, including on an old $450 million loan taken nearly 30 years ago. The request coincided with the UAE president’s recent visit to Pakistan. Following the meeting, Prime Minister Shehbaz Sharif said the UAE had agreed to extend the facility, though no details were disclosed.

According to central bank and government officials, Pakistan has sought the rollover of $2.45 billion in maturing deposits $1 billion due this Friday and another $1 billion the following week. Officials indicated that the UAE president had already agreed in principle to extend the maturity, but the duration, one year or two years, remained unconfirmed. Pakistan has requested a two-year extension along with a rate cut of more than half. Responses from the State Bank of Pakistan (SBP) and the Ministry of Finance were awaited at the time of reporting.

PM Sharif had earlier informed the cabinet that $2 billion in repayments were falling due and the UAE was extending the facility. The UAE had originally provided $2 billion in 2018 for one year. This deposit forms part of Pakistan’s $16 billion foreign exchange reserves. Finance Minister Ishaq Dar said Pakistan still owes $12 billion to friendly nations, including $5 billion to Saudi Arabia, $3 billion to the UAE, and $4 billion to China.

The UAE charged 3% interest in 2018, but raised it to 6.5% last year. Pakistan is now seeking to lower the rate back to around 3%, citing an improved credit rating and easing global rates. The second $1 billion tranche was deposited in July 2023 as part of IMF requirements to secure short-term financing. Pakistan also owes $450 million from a 1996–97 loan, currently bearing 6.5% interest. The government is seeking a two-year extension, arguing that repayment during the ongoing IMF program (ending September next year) would not be feasible.

Pakistan’s external stability continues to rely on rollovers from friendly countries and fresh financing from the IMF and World Bank. Despite efforts, exports dropped nearly 9% to $15.2 billion in the first half of the fiscal year, and foreign investment remains subdued. A committee has been formed to examine how to double exports from $32 billion to $63 billion within four years.

Separately, the World Bank informed Finance Minister Muhammad Aurangzeb on Thursday that Pakistan’s investment levels remain below the targets set under its 10-year, $20 billion Country Partnership Framework (CPF). World Bank Country Director Bolormaa Amgaabazar stressed the need to accelerate private investment. The CPF board approved the lending envelope last year, but disbursements depend on economic improvements and policy-based loan conditions.

According to the Finance Ministry, discussions with the World Bank delegation focused on a programmatic investment framework covering business climate reforms, SOE restructuring, trade facilitation, capital markets, and export competitiveness. Both sides acknowledged that macroeconomic stability has improved through tighter fiscal and monetary policies, but emphasized translating this into sustained growth, higher investment, and employment.

The World Bank proposed a results-based model with clear policy milestones, performance indicators, and targeted technical support. Pakistan also sought the Bank’s backing for refinancing roughly $36 billion in legacy energy debt. While the Bank indicated it cannot fully finance the amount, it may extend policy-based guarantees to support refinancing and liability management.

A preliminary proposal aims to replace expensive foreign borrowing with cheaper multilateral financing on a concessional, long-tenor basis. The plan seeks a 15-year repayment period, including a four-year grace period, to lower electricity tariffs to roughly 8–9 cents (around Rs25) per unit.