Pakistan repays $2bn UAE deposit, eyes new financing options to support reserves

ISLAMABAD: The State Bank of Pakistan on Saturday confirmed that Pakistan has repaid $2 billion in deposits to the United Arab Emirates, along with interest, as part of its external debt obligations.

According to the central bank, the funds had been placed as a safe deposit with the SBP. The repayment comes amid ongoing efforts to manage foreign exchange reserves and meet external financing requirements.

The development follows an agreement with Saudi Arabia to extend the maturity of its $3 billion deposit with Pakistan, providing some relief to the country’s external position. Earlier this week, the SBP had also confirmed receipt of $2 billion from Saudi Arabia, helping stabilise reserves.

Despite these inflows, analysts say Pakistan’s external financing gap could widen after the UAE repayment, particularly as the country also paid around 6 per cent interest on the deposit. Recently, Pakistan repaid an additional $1.43 billion in external debt, including a $1.3 billion Eurobond.

Finance Minister Muhammad Aurangzeb has said the government is exploring multiple options to replace the UAE facility and maintain reserves. These include issuing Eurobonds, raising funds through Islamic sukuk, securing commercial loans, and seeking bilateral support from partner countries.

Speaking on the sidelines of the IMF-World Bank Spring Meetings, Aurangzeb noted that Pakistan’s reserves currently cover about 2.8 months of imports, a level he described as critical for maintaining macroeconomic stability.

He added that while Pakistan has not yet sought changes to its $7 billion programme with the International Monetary Fund, adjustments could be considered depending on the economic impact of the ongoing Middle East crisis.

The IMF board is expected to approve the next tranche of funding — just under $1.3 billion — in the coming weeks under the Extended Fund Facility and the Resilience and Sustainability Facility, providing further support to Pakistan’s external account.