Islamabad: Pakistan is set to return $2 billion in matured deposits to the United Arab Emirates (UAE), along with a 6% interest payment this month, a move that could widen the country’s external financing gap, officials confirmed.
The repayment comes at a crucial time as Pakistan approaches a staff-level agreement with the International Monetary Fund (IMF) under a $7 billion Extended Fund Facility (EFF). The foreign exchange reserves target for June 2026 has been revised slightly downward from $17.8 billion to $17.5 billion.
Officials noted that the external financing gap, initially estimated at $460 million for FY26, could rise to $2.46 billion once the UAE repayment and interest are accounted for. The government now faces the task of managing the gap internally or negotiating with the IMF for adjustments in the State Bank of Pakistan’s reserves.
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Pakistan Rejects Misleading Commentary on UAE Financial Deposits, Reaffirms Strong Partnership with UAE pic.twitter.com/0RCfCEbmea— Ministry of Foreign Affairs - Pakistan (@ForeignOfficePk) April 4, 2026
A senior official emphasized that the repayment reflects Pakistan’s financial integrity and national responsibility. “While it may temporarily affect foreign exchange reserves, it is not expected to create a crisis like in the past, such as after the 1998 nuclear tests,” the official said.
The Ministry of Foreign Affairs (FO) rejected claims suggesting the transaction was unusual or controversial, clarifying that the deposits reflect “the UAE’s strong support for Pakistan’s economic stability and prosperity.” The FO described the repayment as a routine financial procedure conducted under mutually agreed terms.
The Foreign Office further highlighted the longstanding and fraternal partnership between Pakistan and the UAE, built on trust, strategic cooperation, and people-to-people ties. Pakistan reiterated its commitment to deepening bilateral relations and ensuring a prosperous future together.
IMF Resident Chief in Pakistan, Mahir Binci, confirmed that the Fund will continue to monitor the situation and coordinate with the Pakistani authorities.
