Pakistan repays USD 2 billion to UAE amid fresh USD 3 billion Saudi backing

Pakistan has repaid USD 2 billion to the United Arab Emirates (UAE) that had been held as a deposit with the State Bank of Pakistan (SBP) , the central bank confirmed on Saturday, as Islamabad grapples with mounting external financing pressures.

The funds were originally provided by the UAE to support Pakistan’s balance of payments , and had typically been rolled over annually. However, the Gulf nation recently sought the return of the deposit after Pakistan failed to secure another rollover, the first such instance in several years.

Officials said Pakistan had been paying around six per cent interest on the deposit. The repayment is part of a broader obligation under which Islamabad is scheduled to return about USD 3.5 billion in deposits to the UAE by the end of April.

The move comes at a time when Pakistan’s external account is already under pressure. Earlier this month, the country repaid USD 1.43 billion in external debt , including a USD 1.3 billion Eurobond maturing on April 8 , which temporarily reduced its foreign exchange reserves.

To cushion the impact, Saudi Arabia deposited USD 2 billion with the SBP earlier this week as part of a broader USD 3 billion support package aimed at stabilising Pakistan’s foreign currency reserves. Riyadh has also agreed to extend the maturity of an existing USD 5 billion Saudi deposit , providing Islamabad additional breathing room.

Pakistan’s foreign exchange reserves were estimated at about USD 16.4 billion in late March , covering roughly three months of imports. The government is aiming to raise reserves to around USD 18 billion under its USD 7 billion International Monetary Fund (IMF) programme , which requires the country to maintain adequate external buffers.

Finance Minister Muhammad Aurangzeb has said the government is exploring multiple options to stabilise reserves and replace the UAE facility, including Eurobond issuances, Islamic sukuk, commercial borrowing and additional bilateral financing from friendly countries such as Saudi Arabia and China.