Minister says Pakistan ‘committed’ to repay US$3 billion loan from UAE

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Pakistan has reaffirmed its commitment to repay a $3.5 billion deposit from the United Arab Emirates, a transaction that will deplete its central bank reserves by nearly a fifth as the country navigates an ongoing IMF programme and regional economic pressures.

The deposit, part of external financing support extended by the UAE in 2019, is being returned under mutually agreed terms, according to Pakistan's Foreign Office. The repayment, which officials say will occur before the end of the month, comes after the UAE declined to roll over the debt for the first time in seven years, a development that has drawn attention to Pakistan's external financing needs.

Coverage comparison

Reporting on the development has varied in emphasis. Dawn's initial report, citing a senior Pakistani official, framed the repayment as a matter of "national dignity," with the official stating that "national dignity could not be compromised for financial considerations." The same official said Abu Dhabi had sought the immediate return of the amount. A subsequent Dawn article, however, reported the Foreign Office's rejection of what it called "misleading and unfounded commentary," insisting the transaction was routine.

The South China Morning Post, in contrast, focused on the financial implications, quoting Finance Minister Muhammad Aurangzeb in Washington as saying Pakistan is considering financing from other countries and banks to manage the repayment and maintain foreign exchange reserves. The minister declined to provide specifics but said "we're looking at all options."

Key claims

• Pakistan is returning $3.5 billion to the UAE, part of support extended in 2019 to stabilise its balance of payments. This claim appears in both Dawn and the South China Morning Post, with Dawn citing official statements and SCMP quoting the finance minister.
• The repayment will reduce Pakistan's central bank reserves by approximately 18%, according to Dawn. Reserves stood at about $16.3 billion in the most recent data cited by Dawn, while SCMP reported $16.4 billion as of March 27.
• Under its IMF programme, Pakistan is required to secure around $12.5 billion in rollovers from three key partners—China, Saudi Arabia, and the UAE—to maintain reserve levels, Dawn reported.
• The UAE had sought immediate return of the deposit, a claim reported by Dawn, citing a senior official. This has not been confirmed by UAE authorities. The Foreign Office statement described the repayment as routine, without acknowledging any demand.
• Pakistan is exploring other financing sources, including commercial banks and bilateral lenders, according to Finance Minister Aurangzeb, as reported by SCMP.
• The repayment could increase pressure on the rupee and complicate Pakistan's IMF position if not offset by fresh inflows, according to economic analysts cited by Dawn.

Perspectives

The Pakistani government, through the Foreign Office, emphasises the transaction as a routine part of bilateral commercial agreements, highlighting the UAE's continued support. The finance minister stresses the country's commitment to meeting its obligations while seeking other resources to keep reserves at appropriate levels.

The UAE's perspective is not directly represented in the available reporting. Dawn's sources indicate Abu Dhabi had sought immediate settlement, but no official Emirati statement is cited.

Economic analysts quoted by Dawn warn of potential currency pressure and IMF complications if new inflows do not materialise. The finance minister, however, expressed confidence in Pakistan's ability to pay back creditors, noting that before recent regional events, the country had solid financial and foreign exchange buffers.

Talks with China and Saudi Arabia for financial support have been reported by Bloomberg News, though Finance Minister Aurangzeb declined to confirm or deny such discussions when asked by SCMP.

As Pakistan navigates this repayment, the extent to which it can secure alternative financing will be key to stabilising its reserves and meeting IMF requirements. The coming weeks are likely to show whether the government's confidence in its external position is justified.