Pakistan to repay $3.5 billion UAE debt this month, including 30-year-old loan

Pakistan will return its entire $3.5 billion debt to the United Arab Emirates this month, including a $450 million loan taken in 1996–97, officials confirmed Friday.

The government has scheduled repayments of $450 million on April 11, $2 billion on April 17, and $1 billion on April 23. These will be in addition to a $1.3 billion Eurobond due April 8, bringing total debt service for the month to $4.8 billion.

The 1996–97 loan, originally for one year, will be cleared after 30 years. The UAE had previously rolled over two $1 billion loans in January for just one month at a 6.5% interest rate. Pakistan had requested a two-year rollover at around 3% interest.

Some officials said discussions are underway to convert a portion of the debt into investment, though no decisions have been finalized.

Under the $7 billion IMF programme, the UAE, Saudi Arabia, and China have pledged to maintain $12.5 billion in deposits with the State Bank of Pakistan until the programme ends in September 2027.

The government may use part of the SBP’s $16.4 billion foreign exchange reserves to meet repayment obligations. Officials said reserves remain “comfortable,” citing past instances when the country survived on as little as a week’s import cover.

Prime Minister Shehbaz Sharif has highlighted the challenges of taking foreign debt, noting such loans often come with strings attached. Meanwhile, Pakistan is struggling with falling exports, down 8% in the first nine months of the fiscal year, and a sharp drop in foreign investment.

Plans to issue $250 million in Panda Bonds this year have stalled due to mismanagement, while talks with the UAE continue to reduce interest rates from last year’s 6.5% toward 3%, reflecting improved credit ratings and lower global rates.