ISLAMABAD: Pakistan’s external financing gap will widen sharply this month after the government decided to repay $2 billion in deposits to the United Arab Emirates plus a 6 percent interest payment.
Consequently, Islamabad must now either cover the extra shortfall on its own or persuade the International Monetary Fund to ease the foreign exchange reserves target for the State Bank of Pakistan at the end of June 2026.
IMF Deal Now Under Pressure
Additionally, the repayment comes at a delicate moment. Officials have just reached a staff-level agreement with the IMF under a $7 billion Extended Fund Facility programme. Authorities had already cut the June 2026 reserves goal from $17.8 billion to $17.5 billion.
Moreover, top sources told The News that the original external financing gap stood at only $460 million. They had counted on rolling over $3.7 billion in deposits from the UAE and Kuwait.
However, the latest plan shows Pakistan will repay $2 billion to the UAE around mid-April, with the remaining $1 billion possibly due in June or July.
Diplomatic Efforts and Foreign Office Response
Furthermore, senior officials confirm Pakistan is now talking at the highest diplomatic levels to manage the situation. While reserves may dip temporarily, the country will not face the kind of crises it endured after the 1998 nuclear tests or other past shocks.
Nevertheless, authorities hope the IMF will understand the added pressure from recent regional tensions and show a more lenient approach.
Meanwhile, the Ministry of Foreign Affairs issued a strong statement on Saturday. It rejected what it called misleading commentary about the UAE deposits. The FO described the repayment as a routine financial transaction carried out under mutually agreed terms.
Overall, it highlighted the UAE’s steadfast support for Pakistan’s economic stability.
