Pakistan is considering repaying its debt to the United Arab Emirates, with sources indicating that a payment of $3.5 billion is scheduled for this month.
The sources revealed that the government will repay $450 million on April 11, $2 billion on April 17, and another $1 billion on April 23, adding that arrangements are being made to settle the debt. However, there is a possibility that the payments may be made from the central bank’s foreign exchange reserves, which currently stand at $16.4 billion.
Sources further stated that the UAE holds deposits totalling $3 billion in Pakistan, with the deadline for repaying the third instalment of $1 billion set for July 2026. Discussions with UAE authorities regarding the deposits are ongoing, and consultations are underway to reach a final decision.
In December, State Bank of Pakistan Governor Jameel Ahmad requested the UAE government to roll over $2.5 billion in debt for two years and reduce the interest rate by nearly half. Subsequently, Prime Minister Shehbaz Sharif also urged the UAE president to extend the repayment period. While the prime minister stated that the UAE had agreed to the rollover, he did not provide further details.
The UAE initially provided $2 billion to Pakistan in 2018 for one year. However, Pakistan was unable to repay the amount and has since sought annual rollovers. In 2023, the UAE extended an additional $1 billion loan to help Pakistan meet its external financing requirements under an IMF bailout program.
In 2018, the UAE charged an interest rate of 3% on the debt, but last year increased it to 6.5%. Pakistan has requested the UAE to reduce the rate to around 3%, citing improvements in its credit rating and lower global interest rates.
The government’s plan to float $250m worth of Panda Bond in January this year has hit a snag due to mismanagement of the entire issue.
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