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Pakistan to Repay $3.5 Billion UAE Debt by Month-End, Reserves to Take Hit

Pakistan has decided to return $3.5 billion in debt to the United Arab Emirates before the end of April, a senior official stated, framing it as a matter of national dignity despite the expected strain on foreign reserves. The repayment, demanded by Abu Dhabi, could reduce the country's central bank reserves by nearly 18%, significantly weakening its external financial buffer. Economic analysts warn the move could increase pressure on the Pakistani rupee and complicate the nation's position under its International Monetary Fund program if not offset by new financing. Meanwhile, the country's National Assembly session was disrupted by opposition protests against a massive government hike in petrol and diesel prices.

Key Points: Pakistan to Return $3.5bn UAE Debt, Impacting Forex Reserves

  • $3.5bn UAE debt repayment by month-end
  • Forex reserves could fall 18%
  • Decision follows UAE demand for immediate settlement
  • Move may pressure currency, complicate IMF program
  • National Assembly session disrupted by fuel price protest
3 min read

Pakistan to return $3.5 bn UAE debt before month end amid reserve concerns

Pakistan will repay $3.5bn to UAE by month-end, a move officials say upholds "national dignity" but could deplete foreign exchange reserves by 18%.

"national dignity could not be compromised for financial considerations - Senior Pakistani Official"

Islamabad, April 4

Pakistan has decided to return USD 3.5 billion in debt to the United Arab Emirates before the end of the month, a senior Pakistani official said, as reported by the Dawn.

The official described the move as a step taken to uphold "national dignity", despite the expected impact on the country's foreign exchange reserves. "The amount will be returned as soon as possible," the official said, adding that "national dignity could not be compromised for financial considerations."

The news report said that Abu Dhabi had sought the immediate return of the funds, which were part of external financial support extended in 2019 through the Abu Dhabi Fund for Development to stabilise Pakistan's balance of payments.

As reported by Daw, Pakistan is currently under an International Monetary Fund programme that requires it to secure about USD 12.5 billion in rollovers from key partners, including China, Saudi Arabia, and the UAE, to maintain reserve levels and meet external financing needs.

The latest data, as reported by Dawn, places Pakistan's central bank reserves at approximately USD 16.3 billion. A repayment of around USD 3 billion could reduce reserves by nearly 18 per cent, significantly weakening the country's external buffer and import cover.

Officials acknowledged that the repayment would impact reserves, but said the decision was taken in light of evolving bilateral considerations and the UAE's demand for immediate settlement.

Economic analysts warned that the move could increase pressure on Pakistan's currency and complicate its position under the IMF programme if not offset by fresh inflows. However, no immediate replacement financing arrangements were indicated.

Meanwhile, Pakistan's Finance Ministry said in a post on X that it is "continuously monitoring and managing Pakistan's external flows to ensure stable foreign exchange reserves".

Meanwhile, the National Assembly of Pakistan was unable to address an extensive 90-point agenda after opposition lawmakers launched a fierce demonstration against a massive surge in fuel prices, Dawn reported.

The legislative session on Friday was disrupted by an outcry over a record-breaking hike of 43 per cent in petrol prices and a 55 per cent jump in high-speed diesel (HSD) rates.

The revised prices, which now stand at PKR 458.4 per litre for petrol and PKR 520.35 per litre for HSD, were disclosed late Thursday night. According to Dawn, the government attributed the spike to a global fuel crisis triggered by the ongoing conflict in the Middle East.

As the opposition launched its protest, Deputy Speaker Ghulam Mustafa Shah was forced to adjourn the sitting without completing any official business. The session was intended to cover a question hour, a calling attention notice regarding solar net metering policies, and several legislative bills.

- ANI

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Reader Comments

S
Sarah B
From an economic perspective, this is fascinating. The UAE demanding immediate repayment suggests a shift in their confidence or their own liquidity needs. Pakistan's decision to prioritize this over IMF program stability is a huge gamble. Will China step in to fill the gap?
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Priyanka N
The contrast is stark. On one hand, they talk about national dignity with UAE, and on the other, the parliament is in chaos over fuel prices that are crushing the public. Where is the dignity for the people struggling to fill their tanks and feed their families? The priorities seem completely misplaced.
A
Aman W
This is a clear lesson in financial management for any nation. You cannot rely forever on borrowed money from friendly countries. Tough decisions are needed, but returning debt without a backup plan will only lead to more hardship. Hope they have a solid strategy for the coming months.
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Karthik V
The geopolitical angle is interesting. UAE asking for money back, parliament disrupted... it shows deep internal and external pressures. Stability in our neighborhood is important for trade and security, so we should watch this situation closely, even if it's not our direct concern.
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Michael C
Respectfully, the term "national dignity" feels like political spin for a forced repayment. When a lender demands immediate return, it's usually because they've lost faith. The real test will be if they can secure the rollovers from China and Saudi Arabia that the IMF requires.

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