Pakistan is preparing to convert a fresh tranche of debt into strategic assets as its financial stress deepens, with the United Arab Emirates set to acquire a stake worth about $1 billion in the army-run Fauji Foundation. The move is also expected to be accompanied by the rollover of an additional $2 billion in loans, underlining Islamabad’s growing dependence on external support.
Speaking at a year-end briefing, Pakistan’s Deputy Prime Minister and Foreign Minister Ishaq Dar confirmed that Abu Dhabi would acquire equity in the Fauji Foundation Group as part of the arrangement.
“We are currently engaged with the UAE…regarding the rollover of $1 billion a few weeks ago. They will be acquiring some shares, and our liability will be eliminated. The shares are of the Fauji Foundation Group,” Dar said, adding that Islamabad hoped to complete the transaction by March 31.
Dar said converting loans into equity would ensure the $1 billion liability coming due at the end of March would no longer remain on Pakistan’s books. Beyond this, the UAE is expected to roll over another $2 billion, even as Pakistan’s overall debt burden continues to swell.
Official figures show Pakistan’s external debt stood at $91.8 billion as of June 2025, while total public debt had climbed to around $286.8 billion. By comparison, the size of Pakistan’s economy is estimated at roughly $410 billion by the International Monetary Fund.
Islamabad has been scrambling to stabilise its current account and reassure lenders that it can stay afloat under IMF conditions. Over the past two years, it has raised around $12 billion from friendly countries to plug gaps.
“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. “Saudi Arabia supported $5 billion in this period. China supported $4 billion via a state-to-state deposit, and the UAE supported $3 billion.”
The planned loan-to-equity swap follows Islamabad’s much-publicised privatisation of Pakistan International Airlines. While the sale fetched about $482 million, it delivered little immediate relief, as the government parked more than $2.3 billion in legacy liabilities in a separate entity.
The latest UAE rollover came after talks between Pakistan Prime Minister Shehbaz Sharif and UAE President Sheikh Mohammed bin Zayed Al Nahyan, who visited Pakistan for the second time this year.
Pakistan’s reliance on bailouts is not new. Since 1958, it has been under 23 IMF programmes and is currently supported by a $7 billion Extended Fund Facility and a $1.3 billion Resilience and Sustainability Facility. Alongside the IMF, Islamabad has leaned heavily on China, which has committed over $75 billion to Pakistan between 1999 and 2023, including large sums under the China Pakistan Economic Corridor.
Years of high inflation, liquidity shortages, natural disasters and the pandemic have left Pakistan’s economy fragile. After contracting in 2023, growth remains weak, with the IMF projecting only about 2.7 percent expansion in the current fiscal year. The latest deal with the UAE underscores how far Pakistan has gone from reform driven recovery to selling stakes in military-linked assets to stay solvent.
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