Pakistan Set to Repay $2-3.5 Billion UAE Debt by End of April Amid Regional Tensions

Pakistan has decided to repay approximately $2-3.5 billion in debt to the United Arab Emirates (UAE) by the end of this month, including a critical $2 billion central bank deposit, instead of seeking another rollover.

The decision follows a push from the UAE for repayment amid evolving regional dynamics in the Middle East. A senior cabinet minister shared details during a background briefing with media, describing the move as a step to address maturing obligations and reduce short-term external dependencies.

The $2 billion deposit, held with the State Bank of Pakistan (SBP) as part of UAE support for Pakistan’s foreign exchange reserves, had seen repeated short-term extensions. Most recently, it was rolled over until April 17 at a higher interest rate of 6.5%. Pakistan had pushed for longer-term relief at more favorable terms ahead of IMF discussions, but received only temporary extensions.

Sources indicate the UAE requested the return of the funds, with the repayment expected in tranches: around $450 million next week, the $2 billion deposit on or around April 17, and an additional $1 billion later in the month. This includes an older $450 million loan from the 1990s that is also being settled.

The development marks a shift from past practices, where the UAE had regularly extended deposits and loans to help stabilize Pakistan’s economy during debt pressures. Officials maintain that bilateral ties remain strong and describe the process as part of routine financial management, even as it comes at a sensitive time for reserves.

Pakistan’s foreign exchange position has relied on such bilateral support in recent years, alongside the ongoing $7 billion IMF Extended Fund Facility. The repayment could exert near-term pressure on reserves but aligns with efforts to manage external liabilities more proactively.