Pakistan’s external financing gap is set to widen after the government decided to repay $2 billion in deposits to the UAE this month, along with 6% interest.
According to sources, this repayment — which was due under mutually agreed terms — will increase the financing gap significantly. Before this, the gap for FY26 was estimated at around $460 million. Now, it could rise to roughly $2.46 billion plus the interest payment.
This comes right after Pakistan struck a staff-level agreement with the IMF for a $7 billion Extended Fund Facility. The foreign exchange reserves target for end-June 2026 was already revised slightly downward from $17.8 billion to $17.5 billion.
Officials say Pakistan is in a comfortable position to meet this obligation and views it as a matter of dignity and good relations with a close friend. However, the repayment may cause a temporary dip in State Bank reserves.
The government is hopeful that the IMF will understand the pressure caused by the ongoing regional war and show flexibility on the reserves target. The IMF Resident Chief in Pakistan said they will follow up on the matter.
Meanwhile, the Foreign Office strongly rejected any misleading commentary about the deposits. It clarified that this is a routine financial transaction based on mutually agreed terms and reflects the strong, fraternal partnership between Pakistan and the UAE.
🔊PR No.9️⃣1️⃣/2️⃣0️⃣2️⃣6️⃣
Pakistan Rejects Misleading Commentary on UAE Financial Deposits, Reaffirms Strong Partnership with UAE pic.twitter.com/0RCfCEbmea
— Ministry of Foreign Affairs – Pakistan (@ForeignOfficePk) April 4, 2026
The FO emphasized that the longstanding ties with the UAE — built on trust, trade, investment, and people-to-people relations — continue to grow stronger.
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