EDITORIAL: The government has decided to return the USD 3.45 billion debt secured from the United Arab Emirates (UAE) – USD 2 billion rollovers since 2019 that were initially renewable annually though the current agreement was for a much shorter period set to expire on 17 April, USD 450 million set to expire on 11 April while USD one billion is due to expire on 23 April. This is fully supported for two reasons: (i) an official from the Finance Ministry revealed to the media on condition of anonymity that the UAE had requested immediate return of the entire amount and Pakistan was willing to bear the cost to uphold national dignity; and (ii) the rate of return was 6 percent on UAE loans, higher than the rate applicable on the remaining USD 10 billion rollovers from China and Saudi Arabia.
Pakistan is currently on an International Monetary Fund (IMF) programme – the third consecutive programme since 2019 – all consisting of a pledge by the government to secure rollovers from the three friendly countries – the UAE, China and Saudi Arabia. The 10 October 2024 USD seven billion 36-month-long Extended Fund Facility (EFF) loan approval documents noted that “restoring fiscal and external viability is critical to ensure Pakistan’s capacity to repay the Fund.
This hinges on strong and sustained policy implementation, including, but not limited to, fiscal consolidation and external asset accumulation, as well as decisive reforms to enable stronger and more resilient economic development.” And, the second review documents dated December 2025 acknowledged that “uncertainty about global geo-economic and financial conditions in major trading partners adds to these risks. Adequate and timely execution of the firm and credible financing assurances from official creditors remains essential to mitigate these risks.”
There is, therefore, the distinct possibility that the exit of one major lender may raise concerns with the Fund staff as and when the fourth review of the ongoing EFF programme is underway; however, it is relevant to note that Pakistan has never ever defaulted on any of its external loans and; repayment to the UAE after it sought the return of all loans to Pakistan was critical to sustaining this market perception that the country will never default on any of its loan payment, interest and/or principal, even if they are unexpectedly recalled. In other words, the decision must be appreciated.
However, critics may point out that the return of the UAE money would draw down the USD 16,381.7 million foreign exchange reserves as on 27 March 2026 to USD 12,931.7 million - an amount that may not be equivalent to three months of imports, a benchmark dictated by the IMF to its member countries, particularly those that are currently on a Fund programme like Pakistan, due to global fuel disruptions as an outcome of the ongoing conflict in the Middle East.
This would also negatively impact on the rupee-dollar parity, which has been stable for quite a few months that, in turn, would raise the budgeted mark-up unless savings are incurred through raising revenue and/or slashing any budgeted expenditure, preferably a current expenditure item.
To conclude, the supporters of the government’s decision argue that Pakistan’s rising role in global geo-politics would almost certainly help in either securing a loan from another bilateral or multilateral or the Fund would defer till the fifth review or an amalgam of both.
Copyright Business Recorder, 2026
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