The UAE has agreed to extend a $2 billion loan to Pakistan by another year, giving the Asian country a reprieve as it engages in discussions with the International Monetary Fund (IMF) for the release of a $1.2 billion loan tranche.

The extension was confirmed Pakistan’s federal institution, which posted the news on X, writing: “UAE has confirmed rollover of its two deposits of $1.0 billion each placed with State Bank of Pakistan for another one year which were maturing in January 2024.” 

The news comes in the same week IMF approved a $700 million loan for Pakistan, contributing to a total disbursement of $1.9 billion under a larger $3 billion bailout programme, which will address domestic and external balances and provide a framework for financial support from multilateral and bilateral partners.

A corresponding IMF report stated that while economic activity has stabilised in Pakistan, the outlook remained ‘challenging’ and was dependent on the implementation of sound policies.

In a statement, Antoinette Sayeh, IMF Deputy Managing Director and Chair, said Pakistan’s programme performance under the Stand-By Arrangement has supported significant progress in stabilising the economy following significant shocks in FY2022-23.

“There are now tentative signs of activity picking-up and external pressures easing. Continued strong ownership remains critical to ensure the current momentum continues and stabilization of Pakistan’s economy becomes entrenched,” Sayeh said.

(Writing by Bindu Rai, editing by Seban Scaria)