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Pakistan has formally requested the United Arab Emirates (UAE) to roll over $2.5 billion in debt for two years and reduce the interest rate by nearly half, including a $450 million loan dating back 30 years.
The request coincided with the UAE president’s visit to Pakistan. Following the meeting, Prime Minister Shehbaz Sharif confirmed that the UAE had agreed in principle to extend the debt repayment period, though the details of interest rates and the exact duration of the rollover remain pending.
Debt Details
| Country / Lender | Outstanding Debt | Current Interest Rate | Maturity / Due Date | Pakistan’s Request / Proposal |
|---|---|---|---|---|
| UAE | $2.45 billion | 6.5% | $1B due Jan 16, $1B next week | 2-year rollover, interest reduced to ~3% |
| UAE (old loan) | $450 million | 6.5% | 30-year loan | Include in rollover request |
| Saudi Arabia | $5 billion | 3–6% | Various | Continue scheduled repayments |
| China | $4 billion | 2–5% | Various | Continue scheduled repayments |
| Other friendly countries | $3 billion | 3–7% | Various | Continue scheduled repayments |
| Energy Sector Loans | $36 billion | High-cost foreign loans | Various | Refinance via multilateral support, 15-year repayment, 4-year grace period |
World Bank Flags Concerns
Separately, the World Bank informed Pakistan that foreign investment levels remain below the $20 billion target outlined under the Country Partnership Framework (CPF). The bank stressed the need for private investment acceleration, improvements in the business environment, and reforms in state-owned enterprises.
Pakistan’s finance ministry said discussions with the World Bank focused on designing a programmatic investment framework, including trade facilitation, capital market development, and export competitiveness. Both parties highlighted Pakistan’s progress toward macroeconomic stability and emphasized translating it into sustained growth, higher investment, and job creation.
Pakistan is also exploring refinancing $36 billion in energy sector debt through multilateral support to replace high-cost foreign loans with cheaper, long-term financing. The government aims to lower the end-consumer electricity price to Rs 25 per unit (8–9 cents) and has proposed a 15-year repayment period with a four-year grace period.
The move comes amid a challenging fiscal backdrop, with Pakistan planning Rs 11 trillion in new debt, adding to an already high Rs 76 trillion in existing liabilities. Exports have declined nearly 9% to $15.2 billion in the first half of the fiscal year, while foreign investment has stagnated, increasing the importance of debt rollover and concessional financing.
