What happened
Pakistan will return its entire $3.5 billion debt to the United Arab Emirates during April, officials said on 3 April 2026, ending months of uncertainty over deposits that Abu Dhabi had recently begun rolling over only a month at a time. A senior cabinet minister, briefing anchorpersons in Islamabad, said the political leadership had decided to repay the full amount, The Express Tribune reported.
The repayment has been scheduled in three instalments: $450 million on 11 April, $2 billion on 17 April and $1 billion on 23 April. The smallest tranche dates to a 1996–97 loan that was originally for one year, meaning it would finally be cleared after about 30 years. Taken together with a $1.3bn Eurobond due on 8 April, the month’s external debt servicing comes to about $4.8bn, according to the business publication Profit, part of Pakistan Today.
The Express Tribune reported that the UAE had raised the interest rate on the deposits to 6.5 per cent, and that Pakistan had asked for a cut to around 3 per cent and a two-year rollover. Some officials said discussions were under way to convert part of the amount into investment, but no decision had been finalised.
Why it matters
The repayment draws down a key buffer at a time when Pakistan is trying to lift its foreign exchange reserves and stay on track with a $7bn International Monetary Fund programme. Profit put the State Bank of Pakistan’s reserves at about $16.4bn, and reported that under the IMF programme China, Saudi Arabia and the UAE had pledged to maintain $12.5bn in deposits with the central bank until the programme ends in September 2027.
Officials framed the decision as a matter of standing. A senior official told Dawn, reporting on 4 April, that the amount would be returned “as soon as possible”, adding that national dignity could not be compromised for financial considerations. Dawn said Abu Dhabi had sought the immediate return, and that recent extensions had become as short as one month, reflecting Emirati unease with the arrangement.
Analysts quoted by Dawn said the repayment could increase pressure on the rupee and complicate Pakistan’s position under the IMF programme if it is not offset by fresh inflows. Officials did not indicate an immediate replacement financing arrangement. The Finance Ministry said on X that it was continuously monitoring and managing external flows to ensure stable foreign exchange reserves, adding that the government remained committed to meeting all external obligations.
What is still uncertain
It is not clear whether any part of the $3.5bn will be converted into investment, or how Pakistan will replace the reserve cushion if fresh deposits or financing do not arrive. The reserve position after each instalment will depend on other inflows during the month, including the $1.3bn Eurobond payment. Profit reported that plans to issue $250m in Panda Bonds this year had stalled, and noted that exports had fallen 8 per cent in the first nine months of the fiscal year.
Sources & reporting notes
This is a synthesis of published material, not eyewitness reporting. Sources were reviewed on 2026-04-03.
- The Express Tribune — Pakistan to repay $3.5 billion UAE debt: cabinet ministerPublished 3 April 2026 · Cabinet minister's background briefing, the $450m/$2bn/$1bn repayment schedule, the 1996–97 loan, the 6.5% interest rate and the requested two-year rollover.
- Profit by Pakistan Today — Pakistan to repay $3.5 billion UAE debt this month, including 30-year-old loanPublished 3 April 2026 · April debt service of $4.8bn, SBP reserves of $16.4bn, the IMF programme's $12.5bn deposit pledge through September 2027, stalled Panda Bonds and the 8% export decline.
- Dawn — Pakistan to return $3.5bn UAE debtPublished 4 April 2026 · Senior official's "national dignity" framing, Abu Dhabi's demand for immediate return, reserves of about $16.3bn and analyst warnings on the rupee and IMF programme.
