UAE Agrees to Roll Over $2bn Loan to Pakistan for Two Months
The United Arab Emirates has agreed to roll over $2 billion placed with the State Bank of Pakistan—but only for 60 days. The short tenor has triggered intense debate in financial markets because Pakistan had sought a longer extension. Instead, the deposit now matures on April 17, 2026, buying time ahead of a crucial IMF review.
This rollover comes as Islamabad works through the third review of the International Monetary Fund program under the $7 billion Extended Fund Facility (EFF). The move stabilizes foreign exchange reserves in the near term, but it also creates another high-pressure deadline in April.
1) What Exactly Was Agreed?
Amount & Structure
- The UAE maintains $3 billion in total deposits with the SBP.
- Of that, $2 billion was due to mature in two tranches (mid–late February 2026).
- This $2 billion has now been extended to April 17, 2026.
Tenor & Pricing
- Duration: 60 days
- Interest Rate: 6.5%
What didn’t happen
- Pakistan had requested a multi-year rollover (up to two years) at a lower rate (around 3%).
- The UAE opted for a short bridge instead of a long-term reset.
2) Why Only 60 Days?
A. IMF Alignment
The short extension acts as a bridge into the IMF’s third EFF review. Maintaining reserve levels is a key “financing assurance” requirement before any tranche is released.
B. Negotiation Leverage
By limiting the rollover to 60 days, the UAE keeps leverage for post-review talks—when program compliance and reform milestones are clearer.
C. Cost & Risk Pricing
At 6.5%, the pricing reflects current risk conditions. A longer tenor would likely require stronger reform progress and improved macro indicators.
3) The Broader External Financing Picture (2026)
| Creditor | Deposit/Exposure | 2026 Status |
|---|---|---|
| UAE | $3bn total | $2bn rolled to April; $1bn due July 2026 |
| Saudi Arabia | $5bn | Rollover targeted this fiscal year |
| China | $4bn | Cyclical rollovers/refinancing ongoing |
Pakistan’s external strategy relies on rollovers + IMF disbursements + bilateral support to keep reserves adequate while structural reforms progress.
4) What This Means for Markets & Citizens
Near-Term Stability
- Prevents a sudden reserves dip in February.
- Supports exchange rate confidence during IMF talks.
April Pressure Point
- Another maturity in mid-April means reform delivery and IMF clearance are critical.
- A successful review could pave the way for a longer UAE extension and additional bilateral comfort.
Borrowing Cost Signal
- The 6.5% rate underscores that external support is available—but not at concessional terms without reform traction.
5) What Happens Next?
- IMF Third Review Outcome: If cleared, it could unlock the next tranche and strengthen Pakistan’s hand in renegotiating longer rollovers.
- July 2026 Milestone: The remaining $1 billion UAE tranche comes due—another key checkpoint.
- Parallel Talks: Engagement with Saudi Arabia and China will continue to smooth the 2026 maturity calendar.
Bottom Line
The UAE’s 60-day rollover is a temporary safety net, not a long-term solution. It buys time for the IMF review and keeps reserves steady, but it also sets up a high-stakes April deadline. The trajectory from here depends on reform execution, IMF clearance, and the ability to convert short bridges into longer, lower-cost commitments.
