Pakistan to repay $2 Billion loan to UAE by month-end

ISLAMABAD: Pakistan has decided to return a $2 billion loan to the United Arab Emirates (UAE) by the end of the current month, ARY News reported, quoting sources familiar with the matter.

The amount, previously held in Pakistan’s account as a safe deposit, will be repaid to Abu Dhabi following a request from the Emirati authorities.

Officials in the Ministry of Finance of Pakistan confirmed that Pakistan had been paying an interest rate of 6 percent on the deposited amount. The arrangement, initially structured on a rollover basis, had allowed the funds to remain within Pakistan’s reserves for a defined period.

Also Read: UAE extends $2 billion loan rollover for Pakistan

In recent months, the rollover terms had already begun tightening. The UAE had earlier extended the same $2 billion deposit for shorter durations instead of the usual annual rollover. At one point, the facility was rolled over for one month, followed by a further two-month extension, pushing the repayment deadlines to mid and late April.

At the time, Pakistani authorities had sought a longer, more stable arrangement, initially requesting a two-year rollover. Subsequent requests were also made to secure extensions, particularly as Islamabad worked to complete a key economic review under its programme with the International Monetary Fund. Officials believed maintaining these deposits was critical for external financing assurances during the review process.

The broader framework also involved support commitments from key partners, including the UAE, Saudi Arabia, and China, which had collectively pledged to maintain around $12.5 billion in deposits with the State Bank of Pakistan until the IMF programme’s conclusion.

However, amid shifting global financial conditions, the UAE requested the return of the funds, prompting Islamabad to move toward repayment.

While the decision may place some pressure on foreign exchange reserves in the short term, officials maintain that the repayment is being managed as part of broader financial planning to uphold credibility and bilateral ties.