NewKerala.com

Pakistan to Repay $3.5 Billion UAE Debt by April End Amid Economic Strain

Pakistan has agreed to fully repay approximately $3.5 billion in deposits and loans to the United Arab Emirates by the end of April after Abu Dhabi demanded immediate return of the funds. The repayment will occur in three tranches, with officials indicating funds will likely be drawn from the State Bank of Pakistan's foreign exchange reserves. While Pakistan's foreign ministry described this as a "routine financial transaction," the timing has raised questions about strain on Pakistan's finances and marks an end to repeated rollovers. The development highlights Pakistan's ongoing challenges in managing external debt while under an IMF program, with exports declining and foreign investment remaining weak.

Key Points: Pakistan Repays $3.5B to UAE as Gulf Nation Demands Debt Return

  • UAE demands immediate repayment of $3.5B
  • Repayment in three tranches by April 23
  • Funds to come from Pakistan's forex reserves
  • Move highlights Pakistan's external debt challenges
  • Part of amount may be converted to investment
2 min read

Pakistan agrees to repay $3.5 billion to UAE after Abu Dhabi demands immediate return of debt

Pakistan agrees to repay $3.5 billion in deposits and loans to the UAE by end of April after Abu Dhabi demands immediate return, straining Islamabad's finances.

"routine financial transaction under mutually agreed bilateral commercial terms - Pakistan Ministry of Foreign Affairs"

New Delhi/Islamabad, April 4 Facing mounting pressure, Pakistan has agreed to fully repay approximately "USD 3.5 billion" in deposits and loans to the United Arab Emirates by the end of April, after the Gulf nation sought the immediate return of the money.

The development comes amid reports that the UAE asked for the swift repayment of the funds, reportedly due to regional tensions linked to the ongoing conflict in West Asia involving the US, Israel, and Iran.

Multiple media reports and senior Pakistani officials have confirmed that Abu Dhabi recently demanded the money back, ending the practice of repeated rollovers that Pakistan had relied on for years.

On Saturday, Pakistan's Ministry of Foreign Affairs issued a statement categorically rejecting what it called "misleading and unfounded commentary" on the matter.

The ministry described the repayment as a "routine financial transaction" under mutually agreed bilateral commercial terms and stressed that the deposits had demonstrated the UAE's support for Pakistan's economic stability.

However, the timing and nature of the UAE's request have raised questions about the strain on Pakistan's finances.

A senior cabinet minister confirmed the decision to clear the entire debt, with repayments scheduled in three tranches: $450 million on April 11, $2 billion on April 17, and $1 billion on April 23. One portion includes a decade-old $450 million loan from 1996-97.

Officials indicated that funds would likely be drawn from the State Bank of Pakistan's current foreign exchange reserves of around $16.4 billion.

Parallel discussions are reportedly underway to convert part of the amount into an investment rather than a full cash repayment. The episode has been viewed as somewhat embarrassing for Pakistan, which has long depended on friendly deposits from the UAE, Saudi Arabia, and China to bolster its reserves under the IMF programme.

Earlier this year, Prime Minister Shehbaz Sharif had publicly admitted feeling "embarrassed" while seeking such external financial support, acknowledging that it often limits the country's policy manoeuvrability. Despite the outflows, Pakistani officials have maintained that reserves remain at "comfortable" levels.

The country has committed to keeping allied deposits intact until the current $7 billion IMF programme concludes in September 2027. The swift repayment - shifting from long-term or short-term rollovers to full settlement within weeks - highlights Pakistan's ongoing challenges in managing external debt and attracting fresh investment inflows while under IMF scrutiny.

The move comes as Pakistan's exports have declined and foreign investment remains weak, adding to the economic pressures on Islamabad.

- IANS

Share this article:

Reader Comments

P
Priya S
The timing is interesting. UAE asking for money back amid West Asia tensions shows how interconnected global politics and finance are. Pakistan is caught in the middle. Hope this leads to more financial discipline there, for the sake of regional stability. 🤔
A
Aman W
Calling it a "routine financial transaction" is such a spin. When you have to pay back $3.5 billion in three weeks from your central bank reserves, it's anything but routine. Their PM admitted feeling embarrassed begging for money... that says it all.
S
Sarah B
As someone who follows international economics, this is a textbook case of debt dependency. Relying on friendly deposits from Gulf nations is not a sustainable economic model. The IMF program seems to be the only thing holding them together until 2027.
V
Vikram M
The common Pakistani citizen will suffer the most. When reserves drop, inflation will rise further. It's a tough situation. While we have our differences, one can't help but feel for the ordinary people struggling with economic hardship. Hope things improve for them.
K
Karthik V
This shows why strong forex reserves and economic self-reliance are so crucial for any nation. We in India have learned this lesson well. Dependence on external debt always comes with strings attached and limits your policy space. Jai Hind! 🇮🇳
N

We welcome thoughtful discussions from our readers. Please keep comments respectful and on-topic.

Leave a Comment

Minimum 50 characters 0/50