ISLAMABAD: Pakistan has decided to return $3.5 billion to the United Arab Emirates before the end of this month, a senior official confirmed on Friday, calling the move essential to uphold the country’s “national dignity.”
According to officials, Abu Dhabi requested the immediate repayment of the funds, which were originally provided in 2019 to support Pakistan’s economy during a balance of payments crisis. The deposits had been extended several times over the years, but recent rollovers had become shorter, indicating growing concerns from the UAE side.
Impact on Foreign Reserves
The repayment is expected to put pressure on Pakistan’s foreign exchange reserves. Currently, reserves held by the central bank stand at around $16.3 billion. Returning such a large amount could significantly reduce this buffer, affecting the country’s ability to manage imports and external payments.
Officials acknowledged the financial impact but said the decision was made after considering changing bilateral dynamics and the UAE’s request for full repayment.
IMF Commitments at Stake
Pakistan is currently under a programme with the International Monetary Fund, which requires the country to secure approximately $12.5 billion in financial support from key allies, including China, Saudi Arabia, and the UAE. The UAE deposits were considered an important part of this arrangement.
Economic experts believe that returning the funds without securing alternative financing could increase pressure on the Pakistani rupee and complicate the country’s position under the IMF programme.
Government Response
Despite the concerns, the Ministry of Finance has reassured that the situation is being carefully managed. In a statement shared on X (formerly Twitter), the ministry said it is continuously monitoring external financial flows to maintain stable foreign exchange reserves.
The government also reiterated its commitment to meeting all international financial obligations and maintaining economic stability during this challenging period.
