Pakistan has decided to repay a pending $3.5 billion loan from the United Arab Emirates (U.A.E.), multiple media outlets reported on Friday, citing sources within the government.
According to the reports, Islamabad would initially return $2 billion, parked with the State Bank of Pakistan (SBP) as a safe deposit, to Abu Dhabi by the end of this month. The loan has been due for several years and has been rolled over by the U.A.E. on an annual basis prior to December 2025, when Abu Dhabi initially extended it for one month and then for another two months. The reports suggest the country was paying around 6% interest on it.
The sources told the outlets that the U.A.E. had recently asked for an immediate return of the funds in the wake of the Middle East conflict.
Officials have said the Abu Dhabi Fund for Development placed $3 billion with the SBP in three separate tranches. Of this amount, two tranches of $1 billion each matured on Jan. 17 and Jan. 23 and were eventually rolled over until April. The third tranche of $1 billion is due to mature in July and may be taken up for rollover closer to its maturity.
The move is expected to prove a drain on the country’s foreign exchange reserves, but officials insist Islamabad is willing to bear the shortage to uphold “national dignity.”
In a statement seemingly addressing the situation, the Ministry of Finance posted on X that it was “continuously monitoring and managing Pakistan’s external flows in order to ensure stable foreign exchange reserves.” It maintained the government was committed to fulfilling all its external obligations.