UAE rolls over $2bn loan to Pakistan: SBP

KARACHI: The United Arab Emirates (UAE) has confirmed the rollover of its two deposits of $1 billion each placed with the State Bank of Pakistan for another year, the SBP said on Thursday. These deposits were maturing this month.

“These rollovers are part of the IMF [International Monetary Fund] programme that the government has attained in September last year, and we expect bilateral rollovers to continue till the remaining tenure of the programme,” said Awais Ashraf, the director of research at AKD Securities Limited.

“Bilateral rollovers and improvement in financial inflows under the IMF programme, along with a controlled current account, stable currency, and FX interventions, would help the SBP build FX reserves,” Ashraf said.

“We expect SBP reserves to surpass the $21 billion mark by FY27, accompanied by a significant reduction in SBP’s forward/swap liabilities during this period,” he added.

The SBP’s reserves currently stand at $11.73 billion.

Last year, Pakistan secured a $7 billion bailout from the IMF, which requires the country to increase government revenues and strengthen its external financing sources, the majority of which are loans from China and the Gulf nations. Pakistan is now seeking to obtain a $1 billion loan tranche from the IMF as part of the Extended Fund Facility. A mission from the global lender is scheduled to visit Islamabad next month to conduct the first review of the existing loan programme.

To maintain solvency in the medium term, Pakistan requires both IMF loans and inflows from other lenders. The IMF estimates that the country’s external financing needs, which include the current account deficit and debt payments, average around $22 billion per year through fiscal 2028.