Islamabad: Amid a deepening debt crisis, Islamabad is preparing to allow the United Arab Emirates (UAE) to acquire a stake worth roughly $1 billion in the Fauji Foundation, the multi-billion-dollar conglomerate run by the Pakistani military. The move is expected to be accompanied by a further rollover of loans amounting to $2 billion by Abu Dhabi, as Pakistan continues to struggle with mounting financial liabilities.
On December 27, Pakistan’s Deputy Prime Minister and Foreign Minister Ishaq Dar confirmed that the UAE would acquire “some shares” in the Fauji Foundation Group, a transaction that would convert a portion of Pakistan’s debt into equity. Dar said a liability of approximately $1 billion is due to expire on March 31, and that this obligation would be eliminated once the share transfer is completed.
“We are currently engaged with the UAE regarding the rollover of $1 billion a few weeks ago,” Dar said during a year-end press briefing at the Ministry of Foreign Affairs. “They will be acquiring some shares, and our liability will be eliminated. The shares are of the Fauji Foundation Group. After extensive meetings by the committee, it is taking the lead. We hope that this transaction will be completed by March 31.”
Dar explained that the conversion of loans into equity would remove the $1 billion liability from Pakistan’s books, easing immediate repayment pressure. In addition, the UAE is expected to roll over another $2 billion in loans, providing temporary relief as Pakistan’s overall debt burden continues to grow.
According to official data released in June 2025, Pakistan’s total external debt stands at $91.8 billion, while total public debt has reached approximately $286.8 billion. By comparison, the total size of Pakistan’s economy is estimated at around $410 billion, based on figures from the International Monetary Fund (IMF), underscoring the scale of the country’s fiscal stress.
The Pakistani government has been under pressure to stabilise its current account deficit and demonstrate financial discipline to satisfy the IMF’s conditions under its ongoing bailout programmes. To meet immediate financing needs, Islamabad has raised roughly $12 billion over the past two years from bilateral partners.
“I was right to say that Pakistan would not have taken $12 billion from the begging bowl if it had acted on the IMF programme,” Dar said. “We would not have been able to balance our accounts, and the IMF was not willing to come on board. I am grateful that the UAE is also involved. I recognise their co-operation.”
Detailing contributions from key partners, Dar said Saudi Arabia had provided support amounting to $5 billion during this period, while China extended $4 billion through a state-to-state deposit. The UAE, he added, contributed $3 billion, highlighting its role as a critical financial backer at a time of economic strain.
The announcement regarding loan-to-equity conversion follows shortly after Islamabad concluded the privatisation of Pakistan International Airlines (PIA), a long-delayed reform pushed under IMF conditionality.
The airline was sold for $482 million, but the government retained more than $2.3 billion in legacy liabilities, which were transferred to a separate entity. As a result, the transaction eased operational burdens but failed to significantly reduce Pakistan’s overall debt load in the short term. The latest rollover of UAE loans came after a meeting between Pakistan’s Prime Minister Shehbaz Sharif and UAE President Sheikh Mohammed bin Zayed Al Nahyan. The Emirati leader arrived in Pakistan on Thursday, marking his second visit to the country during the current calendar year. Pakistan has a long and persistent history of reliance on IMF assistance, having entered 23 IMF programmes since 1958. The country remains locked in a recurring cycle of fiscal crises and external bailouts. At present, Pakistan is supported by at least two IMF facilities: a $7 billion Extended Fund Facility (EFF) and a Resilience and Sustainability Facility (RSF) valued at approximately $1.3 billion.
Beyond the IMF, Pakistan has also depended heavily on Chinese financial support over the past two decades. Between 1999 and 2023, China committed $75.62 billion to Pakistan through a combination of loans and grants, according to AidData, a research laboratory affiliated with the College of William and Mary. Of this total commitment, roughly $26 billion was extended as general budgetary support, AidData reported. From 2022 through earlier this year, Pakistan’s economy faced a series of severe challenges, including high inflation, acute liquidity shortages, natural disasters, and the lingering economic effects of the COVID-19 pandemic. These pressures contributed to a prolonged slowdown between 2019 and 2022. In 2023, Pakistan’s economy contracted by 0.2 per cent, according to IMF data. While growth is expected to recover modestly, the IMF projects expansion of only about 2.7 per cent for the 2025 fiscal year, reflecting the continuing fragility of the country’s economic outlook amid rising debt and reliance on external support.
