ISLAMABAD:
Pakistan’s top economic decision-makers on Wednesday remained mum on the reasons behind a mere one-month extension in the repayment of $2 billion in debt by the United Arab Emirates, but said that all $12 billion worth of bilateral commitments remained in place.
The Ministry of Finance referred a question on whether there were political reasons behind the one-month extension in the debt repayment to the Ministry of Foreign Affairs.
During and after a meeting of the Senate Standing Committee on Finance, Finance Minister Muhammad Aurangzeb, Finance Secretary Imdadullah Bosal and State Bank of Pakistan (SBP) Governor Jameel Ahmad did not directly respond to questions regarding the one-month extension.
“At the time of the Extended Fund Facility (EFF) programme, we had to give the entire picture and all bilateral arrangements are part of that,” the finance minister said after the committee meeting.
He was referring to assurances given by China, Saudi Arabia and the UAE to the International Monetary Fund (IMF) that they would retain their cumulative $12 billion cash deposits with the SBP during the three-year programme period.
The finance minister further said that if there were any change in the $12 billion assurance arrangement, the government would inform the media.
To a question on whether the UAE rolled over the debt for only one month due to the geopolitical situation, the finance minister reiterated that “all the bilateral commitments were in place”.
During the committee meeting, Senator Abdul Qadir asked the finance secretary and the SBP governor whether the UAE was unhappy. Bosal said that only the Ministry of Foreign Affairs could respond to that.
The secretary did not make any remark on the reason behind the one-month extension or whether the government would again reach out to the UAE for a longer extension.
The Express Tribune reported on Tuesday that the UAE rolled over $2 billion in debt for one month at the existing interest rate of 6.5%. The UAE rolled over two loans of $1 billion each, which matured on January 16 and 22. Sources said the debt was rolled over for one month to allow time for further discussions on the tenor and interest rate. Pakistan is seeking a two-year rollover and an interest rate of around 3%.
Officials said another request was being made to roll over the debt, as its repayment would create a financing gap that would need to be filled from other sources.
Under the $7 billion IMF programme, the UAE, Saudi Arabia and China have committed to maintaining their combined $12.5 billion in cash deposits with the SBP at least until the programme expires in September next year. The UAE has provided a total of $3 billion in cash deposits, Saudi Arabia $5 billion and China $4 billion.
In December, the SBP governor requested the UAE government to roll over $2.5 billion in debt for two years and cut the interest rate by almost half. Subsequently, Prime Minister Shehbaz Sharif also requested the UAE president to extend the repayment period. The prime minister said the UAE had agreed to roll over the debt, but did not provide further details.
The UAE provided $2 billion to Pakistan in 2018 for one year, but Pakistan was unable to repay the amount and has sought annual rollovers since then. Later, the UAE extended another loan of $1 billion in 2023 to help Pakistan meet external financing requirements for an IMF bailout.
The $2 billion debt forms part of Pakistan’s foreign exchange reserves of $16 billion. Pakistan is paying about $130 million annually in interest on the UAE debt at current rates.
Prime Minister Shehbaz Sharif said last week that when he travelled the world seeking financial assistance, he felt embarrassed. “Our self-respect suffers greatly when we take on debt,” he said, adding that such countries sometimes ask for concessions in return and “we cannot say no to many things they want us to do”.
In 2018, the UAE charged an interest rate of 3% on the debt, but last year increased it to 6.5%. Pakistan has requested the UAE to reduce the rate to around 3%, citing improvements in its credit rating and lower global interest rates.
The SBP governor also said that he did not want to comment on the issue of the one-month extension in the UAE debt.
Responding to another query, the finance minister said Pakistan-IMF talks for the third review of the $7 billion package were scheduled towards the end of February. The successful conclusion of the talks would pave the way for the release of a $1 billion fourth tranche and around $220 million under the climate facility. The finance minister said the launch of the Panda Bond had been extended to the first quarter of this fiscal year due to holidays in China. The government has been trying to launch $250 million worth of Panda bonds since December 2024.
Aurangzeb also said that the second meeting of the National Finance Commission would be held only after meetings of all sub-groups had taken place. He said a few sub-group meetings were scheduled for next week.
