Islamabad (TDI): Pakistan has decided to return $3.5 billion in debt to the United Arab Emirates before the end of the month, according to a senior official, in a move described as necessary to uphold national dignity despite potential economic strain.
The funds, originally provided in 2019 as financial support to stabilize Pakistan’s balance of payments, had been placed through the Abu Dhabi Fund for Development and rolled over multiple times in recent years. However, the UAE recently requested immediate repayment, prompting Islamabad to act, according to Dawn.com.
Officials acknowledged that the repayment would significantly impact the country’s foreign exchange reserves, which currently stand at around $16.3 billion. A repayment of this scale could reduce reserves sharply, weakening Pakistan’s external buffer and its ability to cover imports.
The decision also comes at a sensitive time, as Pakistan remains engaged in a program with the International Monetary Fund. Under this arrangement, the country is expected to secure around $12.5 billion in rollovers from key partners, including China, Saudi Arabia, and the United Arab Emirates, to maintain financial stability.
Read More: Pakistan, UAE Reaffirm Trade Ties in Virtual Talks
Economic experts warn that returning the funds without securing alternative financing could put additional pressure on the Pakistani rupee and complicate ongoing efforts to stabilize the economy. However, officials indicated that the decision was driven by evolving bilateral considerations and the UAE’s demand for repayment.
Meanwhile, the finance ministry stated that it is closely monitoring external financial flows and remains committed to meeting all international obligations while maintaining stable foreign exchange reserves.
Read More: Pakistan Send Vessels to Saudi, UAE Ports to Secure Oil Supplies Amid Hormuz Disruption
The move highlights the delicate balance Pakistan faces between maintaining diplomatic relations and managing economic challenges amid tight financial conditions.
