Anwaar-ul-Haq Kakar, the acting prime minister, is expected to request that Pakistan be given a one-year extension to repay a $2 billion loan from the United Arab Emirates (UAE). Negotiations are underway to grant the request for an extension, and Pakistan’s Ministry of Finance is optimistic that an agreement can be reached this week.
This financial arrangement reminds us of a similar scenario that occurred on January 18, 2023, when the UAE, at the request of Prime Minister Shehbaz Sharif, extended a $2 billion loan repayment. The State Bank of Pakistan had received an initial deposit of $3 billion from the UAE, of which $1 billion was due on January 17 and the remaining $1 billion on January 23.
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The stakes are especially high as the dates for debt payback draw near. The optimism of the Ministry of Finance is based on previous successful negotiations, which show that there is a diplomatic precedent for these kinds of agreements between the two countries. If approved, the extension would give Pakistan much-needed financial breathing room.
The State Bank of Pakistan had $8.155 billion in foreign exchange reserves as of January 5, 2024, a little less than the $8.221 billion it had on December 29, 2023. In spite of this decline, central bank reserves have increased by more than $1 billion overall in recent sessions. Pakistan’s ability to handle economic difficulties is demonstrated by its financial stability, which strengthens its bargaining power.
The significance of diplomatic and financial cooperation is shown by the current loan extension negotiations between Pakistan and the United Arab Emirates. The result will influence Pakistan’s immediate financial responsibilities as well as the nature of its economic partnership with the United Arab Emirates.
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