Pakistan has agreed to repay a USD 2 billion loan to the United Arab Emirates after the Gulf nation demanded the immediate return of the funds.
The repayment is expected to be completed by the end of April 2026. The loan was originally provided by the UAE to support Pakistan’s balance of payments and had been held with the State Bank of Pakistan. It was regularly rolled over in previous years, but recent extensions were kept short before the latest repayment request.
Reason Behind the Demand
Sources indicate that shifting geopolitical conditions and economic pressures arising from the ongoing conflict in West Asia prompted the UAE to call back the deposit rather than continue rolling it over.
Pakistan’s economy has been facing challenges due to low foreign exchange reserves and external financing needs, making this repayment a significant test of the country’s financial management.
Loan Details
The USD 2 billion facility carried an interest rate of around 6%. It formed part of a larger financial package from the Abu Dhabi Fund for Development. Two tranches of USD 1 billion each had matured earlier this year and were briefly extended before the full repayment was requested.
Impact on Pakistan
The decision to repay the loan puts additional pressure on Pakistan’s foreign exchange reserves. However, it also reflects Islamabad’s commitment to honouring its international financial obligations. Pakistan is simultaneously seeking support from other partners including Saudi Arabia and China to manage its external debt.