United Bank Limited (UBL) and Pakistan Mobile Communications Limited (Jazz) have executed the country’s largest-ever interest rate swap (IRS) transaction, with a notional value of Rs. 75 billion, marking a major milestone for Pakistan’s financial derivatives market.
The agreement allows Jazz to convert its floating-rate borrowing into a fixed-rate obligation, giving the telecom operator long-term cost certainty and shielding it from potential future interest rate hikes.
The floating-rate loan was tied to the six-month Karachi Interbank Offered Rate (KIBOR) and last reset in November 2025, with Jazz’s borrowing cost estimated between 11.5% and 12%, based on 6M KIBOR plus a 60 basis-point spread. By locking in a fixed rate through the swap, Jazz secures predictable financing costs over the life of the deal.
Financial analysts highlight that the swap also positions UBL for potential gains. According to Shahid Ali Habib of Arif Habib Ltd, a 50 to 200 basis-point decline in floating rates could generate an annual gross benefit of Rs. 0.38 billion to Rs. 1.5 billion for the bank before taxes.
Experts say the transaction reflects a growing maturity in Pakistan’s derivatives market and increasing confidence among corporate and institutional players amid expectations of a medium-term easing in interest rates.
“By taking long-term fixed-rate exposure without using balance-sheet capital, UBL is strategically positioning itself for a potentially lower interest-rate environment,” analysts noted. This could influence lending behavior in the banking sector and contribute to compression in medium- and long-term bond yields.
For corporate borrowers, the deal demonstrates sophisticated liability management, while for banks, such instruments offer new sources of risk-based earnings beyond traditional lending. Market participants suggest that as demand for hedging tools grows, derivatives like IRS can play a critical role in diversifying revenues and strengthening Pakistan’s financial markets.