Pakistan has finalized comprehensive arrangements to settle 4.8 billion dollars in external debt obligations by June 2026. This significant financial movement includes 3.5 billion dollars owed to the United Arab Emirates across three distinct facilities. As part of this strategy, the federal government has committed to returning 2 billion dollars to Abu Dhabi by the end of the current month. These specific funds had been maintained as a deposit with the State Bank of Pakistan, accruing an interest rate of approximately 6%. While the UAE has historically opted to roll over these deposits on an annual basis, the financial landscape shifted in late 2025. Starting in December, extensions were granted only for shorter durations of one and two months, signaling a more cautious approach to liquidity management.
The timing of these repayments coincides with heightened geopolitical tensions. Reports suggest that the UAE requested the immediate return of these funds due to the volatile situation in the Middle East following the US-Israel conflict with Iran. Despite these pressures, high-level diplomatic efforts led by Deputy Prime Minister Ishaq Dar initially secured a short-term rollover for the 2 billion dollar deposit, extending the deadline to April 17, 2026. This follows previous one-month extensions for two separate 1 billion dollar tranches that matured in February. Another 1 billion dollar payment is currently scheduled for July 2026. Currently, the Abu Dhabi Fund for Development maintains a total of 3 billion dollars with the central bank, with officials monitoring the final tranche as its maturity date approaches.
Beyond the bilateral deposits, Pakistan is also managing the maturity of a 1.3 billion dollar Eurobond this week. This ten-year bond will be repaid in full, adding to the immediate liquidity requirements of the state. To mitigate these outflows, Islamabad has reportedly received assurances of over 5 billion dollars in financial support from two other friendly nations. The Foreign Office has moved to clarify that these repayments are routine financial transactions conducted under bilateral commercial agreements, rejecting any speculative claims regarding the nature of the debt return. For the current fiscal year, the government continues to manage a broader strategy involving the rollover of 12 billion dollars in total external deposits, which includes 5 billion dollars from Saudi Arabia and 4 billion dollars from China.
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