Pakistan to repay $3.5 billion UAE debt, ending long-term rollovers

Pakistan has decided to repay $3.5 billion in outstanding debt to the United Arab Emirates within April, moving away from long-standing rollover arrangements in a bid to strengthen financial stability and reassure international creditors.

The decision, reported by Dawn, follows recent changes in Abu Dhabi’s approach to its deposits in Pakistan. The UAE had shifted from routine extensions to short-term monthly rollovers, a move that introduced uncertainty into Islamabad’s financial planning.

A senior Pakistani official said the repayment is intended to “remove doubts about the future of the deposits and avoid repeated short-term extensions,” signalling a deliberate effort to reduce reliance on temporary financing arrangements.

For years, Pakistan has depended on the rollover of deposits from Gulf partners to support its external financing position. However, the latest one-month extension heightened concerns within the government about the risks associated with such short-term commitments. Officials believe that settling the full $3.5 billion obligation will lower the risk of any abrupt refusal by the UAE to renew the deposits.

The move is also part of a broader strategy to improve relations with international creditors, including the International Monetary Fund, by clearing outstanding liabilities and demonstrating fiscal discipline.

The repayment package includes a long-standing $450 million loan dating back to 1996–1997. Originally issued with a one-year maturity, the loan has been extended multiple times over nearly three decades. Officials indicated that this portion of the debt could be repaid as early as next week.

At the same time, Islamabad and Abu Dhabi are engaged in discussions aimed at reshaping their financial relationship. According to the official, both sides are exploring a “transition from lending to investment,” under which part of the repaid funds could return to Pakistan in the form of investments, particularly in the energy and infrastructure sectors.

By Tamilla Hasanova