The State Bank of Pakistan (SBP) has finalized the repayment of $3.45 billion in deposits to the United Arab Emirates, marking a crucial achievement in the country’s external debt management efforts. The concluding payment of $1 billion was transferred to the Abu Dhabi Fund for Development (ADFD) on Thursday, officially settling the outstanding balance of the short-term financial support extended by the Gulf ally.
This final installment follows a significant repayment of $2.45 billion made just last week, reflecting the central bank’s strong commitment to fulfilling its international financial obligations promptly. Historically, these deposits were renewed annually to support Pakistan’s foreign exchange reserves. However, the decision to retire the entire $3.45 billion debt signals a strategic shift away from dependence on short-term deposit inflows.
In a significant development, this repayment is expected to enhance Pakistan’s credibility with global credit rating agencies and multilateral lenders by demonstrating its ability to handle substantial capital outflows without causing instability in the domestic economy.
Despite the large dollar outflow, the State Bank remains confident about maintaining a stable reserve position as the fiscal year approaches its end. To offset the impact of the UAE repayment, the government has stepped up efforts to diversify funding sources. This includes securing a $3 billion deposit extension from Saudi Arabia and successfully issuing a $500 million Eurobond.
Analysts note that while the country’s immediate liquidity has been tested, this move aligns with the broader goals of the IMF-supported program, which targets raising foreign exchange reserves to around $18 billion by June.
