Pakistan seeks rollover of $3 billion UAE deposits to ease financing pressure

Pakistan is preparing to formally request the United Arab Emirates to roll over $3 billion in loans deposited with the country’s central bank, government sources said, as Islamabad works to manage near-term external financing pressures.

Officials said the Ministry of Finance has completed the necessary groundwork for the rollover, and Prime Minister Shehbaz Sharif is expected to write to UAE President Sheikh Mohammed bin Zayed Al Nahyan seeking approval to extend the deposits under existing terms and conditions.

According to officials, three separate $1 billion deposits from the UAE are currently held by the State Bank of Pakistan to support the country’s balance of payments.

One tranche is set to mature in the second week of January, another in the third week, while the third will be rolled over as its maturity approaches.

Sources said Pakistan expects the rollover process to be completed by mid-January. The request to UAE authorities will seek the extension of all three tranches.

The interest rate on the safe deposits could exceed 6.5%, according to officials familiar with the matter.

Pakistan has relied heavily on financial support from friendly countries, including the UAE, Saudi Arabia and China, to stabilize its foreign exchange reserves amid ongoing economic reforms and an International Monetary Fund program.

An independent financial analyst said the rollover is critical for short-term stability.

“Rolling over the UAE deposits would help Pakistan avoid pressure on its foreign exchange reserves at a sensitive time,” said the analyst.

“While it doesn’t solve structural issues, it provides breathing space for the government to continue fiscal and external sector reforms.”

The UAE has emerged as a key financial partner for Pakistan in recent years, extending deposits and loans to help the South Asian nation manage recurring balance-of-payments challenges.

State Bank of Pakistan Governor Jameel Ahmed in a corporate briefing on December 15 said that total repayments in fiscal year 2025-26 amount to $25.8 billion, comprising $21.4 billion in principal and the remainder in interest. Till half of December, $9.7 billion has been settled, of which $5.3 billion was rolled over and $4.4 billion repaid.

This leaves $16.2 billion outstanding, of which $9.3 billion is expected to be rolled over, while the remaining amount will be repaid during FY26.

SBP’s foreign exchange market interventions have remained broadly in line with last fiscal year, with lower activity in the early months followed by stronger interventions from Sep-Nov, supporting reserve accumulation while meeting external payment obligations. As a result, FX reserves have continued to rise despite ongoing debt repayments, reaching $15.8 billion and exceeding the December target of $15.5 billion.

With the planned buildup, the SBP aims to raise import cover to around three months by June, broadly in line with the IMF forecast of 2.7 months.