Pakistan has resolved to return a $2 billion loan to the United Arab Emirates (UAE) by the conclusion of the current month. This amount, which had been held in Pakistan’s account as a secure deposit, will be reimbursed to Abu Dhabi following a formal request from Emirati authorities.
Officials from Pakistan’s Ministry of Finance confirmed that the country had been paying an interest rate of 6 percent on the deposited funds. The loan was originally structured on a rollover basis, allowing the funds to remain within Pakistan’s reserves for a specified timeframe.
In recent months, the terms of the rollover had tightened significantly. The UAE had shifted from annual rollovers to shorter extensions, initially approving a one-month rollover followed by an additional two-month extension. These adjustments pushed the repayment deadlines to mid and late April.
During this period, Pakistani officials sought a longer and more stable arrangement, initially requesting a two-year rollover. Further extension requests were made as Islamabad worked to complete a crucial economic review under its International Monetary Fund (IMF) programme. Maintaining these deposits was seen as essential for securing external financing assurances during the review process.
Notably, the broader financial framework involved commitments from key partners such as the UAE, Saudi Arabia, and China. Together, these countries pledged to maintain approximately $12.5 billion in deposits with the State Bank of Pakistan until the IMF programme’s conclusion.
However, amid evolving global financial conditions, the UAE requested the repayment of the funds, prompting Pakistan to proceed with the reimbursement. While this move may exert short-term pressure on Pakistan’s foreign exchange reserves, officials emphasize that the repayment is part of a broader financial strategy aimed at preserving the country’s credibility and strengthening bilateral relations.
