What options does Pakistan have to pay off $3.5bn UAE loan?

As pressure mounts following Pakistan’s decision to repay around $3.5 billion to the United Arab Emirates (UAE), the government is exploring several options to manage the repayment.

“According to our channel checks, Pakistan has decided to repay as it has made arrangements to balance this outflow, although details of the inflows are not yet available,” said Topline Securities in a report on Tuesday.

According to officials, $450 million would be paid this week, while the remaining $3 billion would be cleared in two tranches—$2 billion on April 17 and $1 billion on April 23.

These loans, some dating back to the late 1990s and later rollovers, carried an interest rate of around 6.5%.

This payment is in addition to the $1.3 billion Eurobond repayment due on April 8, 2026.

According to the State Bank of Pakistan, the total liquid foreign reserves held by the country stood at $21.789 billion as of 27 March 2026.

“Surprisingly, the FX market has remained calm after this development, and PKR has marginally appreciated against the expectation of depreciation.  Similarly, there was no panic observed in the exchange companies, and there is no news of a huge premium in the informal market,” noted Topline Securities.

The brokerage house, while citing reports, said that the government has arranged funds from two friendly countries to tackle this payment requirement.

“This could be one option to manage the outflow of $4.8 billion. We believe that if the government can secure long-term financing from friendly countries, that will be a positive development,” added Topline Securities.

Besides borrowing from friendly countries, the government may opt for arrangements through SWAPs till June 2026.

“The currency SWAPS exposure of Pakistan currently stands at $1.8 billion against a maximum of $5.7 billion in February 2023,” noted Topline. “This increase may cover up for reserves’ fall in the short term; however, this will affect the IMF quarter-end Net International Reserves (NIR) target.”

Another option, it said, is for the SBP to intervene in the FX market and buy US dollars. “Another option which could be considered is to aggressively buy a few of the requirements from the market and take a small hit on reserves for the balance amount.

In the short run, Topline believes that PKR/US$ will remain in check as SBP has a reasonable level of reserves. “Moreover, SBP may take administrative measures to manage FX reserves and balance of payment based on the past practice,” concluded the report.